Electricity, steel giants blame each other on electricity shortage

VietNamNet Bridge – The Electricity of Vietnam (EVN) has accused steel mills of consuming too much electricity, thus leading to the electricity shortage. In reply, steel manufacturers said EVN should not shift the blame onto others.

Steel mills gobble up too much power

EVN has said that steel mills and cement plants consumed 10 percent of the total electricity consumed in the country in the first quarter of 2012.

Cement plants consumed 1.116 billion kwh, or 4.88 percent of merchandise electricity, while steel mills consumed 1264 billion kwh, accounting for 5.53 percent.

EVN has pointed out that the figures are overly high, if noting that steel mills and cement plants’ operation was in stagnation in the first quarter. The cement industrial production decreased by 6.5 percent, while sales decreased by 9.5 percent. The figures were 8.9 percent and 2.2 percent for steel production in the first four months of the year.

If the consumption level maintains in the next three quarters, the steel industry would consume more than 5 billion kwh in the whole year 2012, while the cement industry would consume 4.5 billion kwh.

EVN has complained that steel and cement industries, which use too much electricity due to the backward technologies, have put a hard pressure on the national electricity supply.

Head of the Electricity Regulatory Agency Dang Huy Cuong recently suggested that Vietnam may need a specific pricing mechanism for steel and cement enterprises.

In 2011, the Ministry of Finance suggested imposing the tariff of 3 percent on ingot steel and finished steel exports, explaining that steel mills earned profits from steel exports (estimated at 10-15 dollars per tone) partially thanks to the low electricity prices.

EVN’s figures unreliable?

Meanwhile, Chair of the Vietnam Steel Association (VSA) Pham Chi Cuong believes that the figures released by EVN are inaccurate, affirming that the high consumption level of electricity was unreasonable if noting that a lot of steel mills had to halt operation amid the slow sales.

According to VSA, the electricity price just accounts for 5.14 percent of the ingot steel price, 0.77 percent of structural steel, while accounting for 0.62-0.91 percent of the prices of other steel products.

As such, the ingot steel production is the most energy consumer, up to 600 kwh per ton. Meanwhile, ingot steel production has been encouraged by the State in order to reduce Vietnam’s reliance on ingot steel imports. This means that domestically made ingot steel is not reserved for export.

In 2011, Vietnam exported 2 million tons of steel products, but this did not include ingot steel exports. Only 300,000 tons of structural steel were exported, while the other exports were steel pipes and galvanized products which were made of imported steel bars.

Cuong has denied the fact that the low electricity price is an important factor that attracts foreign steel manufacturers.

To date, Posco Vietnam in Ba Ria – Vung Tau remains the only foreign invested steel project using the power provided by the Electricity of Vietnam. Meanwhile, other projects have not used EVN’s electricity for some reasons. Some of the projects are still under construction; others are still looking for investors, while some projects have had the investment licenses revoked.

Cuong stressed that foreign investors do not entertain any illusion about the low electricity prices. They understand that once their projects are put into operation, in five years, the electricity price would be raised in accordance with the government’s plan to apply market rules in power pricing and remove the subsidization.

Tran Thuy


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