China, Japan and other Asian buyers of Vietnamese coal can expect more uncertainty in the volume of shipments this year as scorching weather linked to the El Nino phenomenon raises domestic power consumption to a record, adding pressure on regional supply of the fuel.
Electricity demand hit 14.96 billion kilowatt-hours in May as households and businesses turned up air-conditioning to beat a heat wave that has enveloped the country since early last month. That led to an 11.31 percent increase in power consumption in the first five months from a year earlier, with the share of coal-fired output rising to more than a third of overall generation. During the period, Vietnam's coal exports to countries including India and South Korea fell a record 77.2 percent to 895,000 tonnes.
Coal demand in Asian countries such as India and Vietnam has also been boosted by the loss of hydropower owing to the heat wave, forcing utilities to turn to other fuels - largely coal. Benchmark Australian prompt coal export prices have climbed 6.5 percent since the beginning of the month to $61.70 a tonne.
The cut in Vietnam's coal exports is also part of a downtrend of about 10 percent a year that began in 2010. Indeed, Vietnam is expected to start importing thermal coal from 2017 as ever-increasing demand for power exceeds domestic availability. Since 2010, Vietnam has been a net consumer of oil, another fuel. Oil demand grew 7.5 percent annually in the 20-year period ended 2013, the region's fastest and more than China's 6.5 percent, ANZ said in a report early this year.
"Vietnam will need to import coal from 2017 for power generation, while we see no need to do so anytime sooner," said an official at Vinacomin, the country's top coal mining group, declining to be identified as he was not authorised to speak to the media.