Vietnam's Coal Sales to China May Fall a Third, Citigroup Says

By Jesse Riseborough

Aug. 11 (Bloomberg) -- Vietnam, the largest supplier of energy coal to China, may cut exports to the world's largest consumer of the fuel by a third after a cyclone damaged a port, Citigroup Inc. said.

Shipments may fall by 8 million metric tons this year after three of the four loaders at Cam Pha port were damaged, Sydney- based analysts Alan Heap and Alex Tonks said in an Aug. 8 report. Macquarie Group analysts said supply may drop by as much as 12 million tons.

The drop in Vietnamese exports may worsen a shortage in China, which is fighting a sixth year of power deficit. China, which uses coal to generate 78 percent of power, last month ordered a cap on prices of energy coal as prices jumped.

``We believe this will reduce supply in an already tight global thermal seaborne market, hence this is positive for coal prices,'' Macquarie's analysts led by Adam Worthington said in an Aug. 8 report.

Thermal coal producers won a 125 percent increase in annual contract prices to $125 a ton from April 1. The price may jump to $200 a ton next year, Citigroup said in the report.

Vietnam exports about 3 percent of global seaborne supply of thermal coal and it may take up to six months to repair the damage at the port, Macquarie's analysts said. Asian seaborne exports of the fuel may drop by between 10 million tons and 12 million tons, the report said.

Citigroup says the damage to the port in the northwestern Quang Ninh province may take four months to repair.

Vietnam National Coal & Mineral Industries Group, the nation's biggest producer and exporter of the fuel, said Aug. 8 the collapse of the cranes won't affect its export target. The company hasn't been able to assess the financial loss, it said.

To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net