Mining to Vietnam
(Last updated: 28 Aug 2013)
Trends and opportunities
The market
Vietnam’s economic growth (5.03 per cent annual GDP growth in 2012 with a forecast of 7-8 per cent economic expansion by 2020), growing population (90 million in 2012) and rapid urbanisation are creating significant pressures on energy demand and supply security. Both Vietnam’s Power Master Plan and Mining Strategy (to 2030) aim to:
- develop a sustainable national energy and mining industry
- diversify and secure energy and resource supplies
- address political and environmental pressures to drive economic returns to the nation
Spreading across more than 331,000km², Vietnam’s mineral endowment includes coal, bauxite, rare earths, tungsten, titanium, phosphate and iron ore.
Coal remains one of the primary energy sources for the domestic market, as well as one of the primary export commodities (14.3 million tons in 2012, valued at US$1.2 billion, mostly to China). Further pressure will be on coal supplies with the deployment of new coal-fired thermal plants (71 of which are planned to be operational by 2030). It is anticipated that Vietnam will transition from a net exporter to a net importer of coal by 2014.
With the exception of coal, bauxite and titanium, most deposits discovered to date have been found to be too small to be economically viable for most international companies. Foreign investment in mining has been minimal and constrained by regulatory issues, investment and market access challenges.
Australian interest in Vietnam’s mining sector is small but growing, largely in the management and operations of local and international mines, as well as the provision of Mining Equipment, Technology and Services (METS).
The industry is dominated by the state-owned Vietnam Coal and Minerals Industries Corporation (Vinacomin). Under Vinacomin there are two groups of companies: coal and minerals.
Coal
Vietnam has large coal reserves, concentrated in the northern area in Quang Ninh province and the Red River Delta basin.
The coal mining industry has existed in Vietnam from when it was a French colony. Currently a state company, Vinacomin group, operates most of the coal mines in Vietnam. There are 22 open cut mines, with capacity ranging from hundreds of thousands of tons to 3 million tons per year. Some of the open cut mines will be closed soon. There are about 23 underground mines also ranging from small capacity to 2.5 million tons per year, and a number of underground mine projects.
Vinacomin has been producing about 40-45 million tons of commercial coal per year and exporting about 25 per cent (mostly anthracite coal). Coal exports will be reduced to meet increasing domestic energy needs. The government plans to encourage new investment by upgrading and expanding current production, and to increase exploitation to about 60-70 million tons by 2025, mainly through underground mining.
Vietnam is seeking to increase production of its deeper high quality anthracite reserves and expand its coal fired power sector. Purchase of heavy mining equipment from Australia has enabled the expansion of existing, and development of new, underground mines.
Minerals
Vietnam has discovered more minerals and natural resources such as:
- oil and gas (1.2 to 1.7 billion cubic metres)
- coal (240 billion tons)
- titanium (600 million tons of heavy minerals)
- bauxite (10 billion tons)
- apatite (2.5 billion tons)
- rare earths (11 million tons)
- mineral construction materials (52 billion cubic metres)
(Source: Ministry of Industry and Trade)
Other than for oil, coal, iron, titanium and apatite, mineral exploration activities have been limited to the basic survey stage.
Major Vinacomin mineral operations and projects include:
- Sin Quyen - Lao Cai Copper Complex Project, capacity of 10,000 tons/year of copper metal, to be increased to 30,000 tons/year
- Ta Phoi copper mine development plan
- Thanh Hoa Chromite mine and processing plant project
- Thai Nguyen Zinc Refinery Plant project with the capacity 10,000 tons/year
- Lao Cai Cast -Iron Refining Plant project with the capacity 30,000 tons/year
- Thach Khe iron ore mine is planned to start in 2014 with a capacity of 7 million tons/year
- Lam Dong Alumina plant with capacity of 650,000 tons/year (operated by Vinacomin and Nhan Co), with a further alumina plant with capacity of 650,000 tons/year under construction
- Song Hong Energy Coal project (underground coal gasification) on pilot scale
The Vietnam Chemical National Corporation (Vinachem) is another state owned company operating several major mining projects:
- Lao Cai Phosphate Rock mining and downstream processing plants
- Rock Salt Mining and KCl processing plant project in Laos
There are also notable private and foreign mining operations and projects including:
- Nui Phao tungsten mine and processing plant in Thai Nguyen province
- Ban Phuc Nickel mine in Son La Province
- Phuoc Son and Bong Mieu gold mines in middle of Vietnam near Danang city
- Cao Bang Manganese mine in Cao Bang province
- Binh Phuoc bauxite mine project
- Many private mineral sand mines along the coast in the south of Vietnam
- Construction materials including limestone and marble mines
Opportunities
Specific areas of opportunity identified for Australian participation and supply include:
- Coal supply
- Mining Equipment, Technology and Services (METS) provision to local and international mining players
- Import/export infrastructure capabilities (deep water coal seaports, intermediary coal terminals and land transportation)
- Education and training including mineral processing technologies, mining techniques and management
Competitive environment
In Vietnam, the main competition is from Chinese, Polish, Russian and German companies.
Australian mining expertise, technologies, equipment and services have been well received by the local industry, but can also be considered expensive.
Tariffs, regulations and customs
Vietnam’s 2011-2020 Minerals Strategy, including its 2030 vision, is set out in Decision 2427/QD-TTg. The key directions are:
- To manage, protect and exploit minerals (which are non-renewable resources) economically, effectively and sustainably in response to national industrialisation and modernisation
- To prioritise the basic survey of geological minerals both underground and at sea in order to clarify the mineral reserves
- To promote international cooperation to acquire and apply modern science and advanced technology in surveying, exploration, mining and mineral processing in Vietnam and overseas, particularly in priority minerals
- To establish a mineral processing industry to create high economic value products, using advanced technology and at a scale commensurate with the potential of each mineral
- To ban the export of raw minerals by 2020 (only exporting high value, processed mineral products). Other minerals are to be exploited and processed in accordance with domestic demand, to strengthen the national mineral reserves as a basis for sustainable socio-economic development.
In Q3 2012, the Prime Minister released two key pieces of legislation, Directive No 02/CT-TTg and Decree No 15/2012/ND-CP detailing the implementation of the mining law. Under Directive 02, the licensing process for certain minerals has been reactivated after more than three months of suspension, in particular:
- Exploration and mining licenses of coal, chromites, rare earths and cement related minerals will continue to be issued, subject to approved master plans.
- New bauxite mines and aluminium production projects will only be implemented once the Tan Rai and Nhan Co projects come into operation and achieve high socio-economic value. No new exploration licences will be issued in the northern provinces.
- Exploration and mining licenses of gold, copper and lead-zinc ore will only be considered on the basis of in-depth processing, modern techniques and environmental protection. New licences for exploitation of placer gold are prohibited.
With respect to the export of minerals, Directive 02 sets out a number of restrictions:
- Export of the following minerals is not allowed: iron ore, lead-zinc ore, chromite, manganese-concentrate, and copper-concentrate, apatite, massive white marble and massive granite
- As from July 1, 2012 exports of titanium ore, which has not been deeply processed, are not allowed
- Export of deeply processed titanium ore, coal and rare earths must be approved by the Prime Minister
Under the mining law, auctions will be required for mining rights with respect to all mining areas, except for certain cases listed in Decree 15. Areas containing minerals that are fundamental to the country’s energy security, such as coal, uranium and thorium; areas containing minerals used for cement production; and, areas that are within the national border belt are not subject to the auction of mining rights.
Decree 15 also draws up a list of conditions for the extension of mining licences. As such, in the event that the project wishes to extend the licence with increased exploitation capacity, the investor is required to submit a revised feasibility study and an environmental-impact assessment report for approval by the relevant authorities.
Environmental protection charges for mineral exploitation have also been increased.
Tariffs currently applied to mineral goods in ASEAN countries are generally low, with those in the zero to five per cent range predominating, and many of these will be eliminated early in many ASEAN tariff reduction schedules under AANZFTA, which entered into force on 1 January 2010.
Key highlights from the AANZFTA on Australia’s top three exports to Vietnam include:
- Petroleum oils - crude (2709.00) – 15 per cent tariff phased to zero per cent in 2016
- Oils/preparations other than crude, containing >70 per cent by weight of such oils (2710.11) – exclusion from tariff commitments
- Lead ores/concentrates (2607.00) – bound at zero per cent on entry-into-force (EIF)
Marketing your products and services
Market entry
Australian companies need to keep regular contact with key market players and identify projects at an early stage. Companies should also maintain good relations with end-users and identify the right distribution channels.
For METS suppliers, local presence and services to customers is essential, companies should consider setting up local representation and a sales resource in-market.
For mining and construction contractors, the establishment of a local operation is required when delivering services in Vietnam.
Austrade has a series of planned activities and in-market engagements to keep across market development, identify project opportunities and promote Australian capabilities.
Barriers to entry
A complicated transaction system, strong competition and a lack of transparency in the procurement process are constraints to ease of business within the mining sector. Language can also be a barrier to market entry.
Links and industry contacts
Government, business and trade resources for Vietnam
Ministry of Natural Resources and Environment – www.monre.gov.vn
Department of Geology and Minerals of Vietnam – www.dgmv.gov.vn
Ministry of Industry and Trade – www.moit.gov.vn
Vinacomin Group – www.vinacomin.vn
Contact details
The Australian Trade Commission – Austrade – is the Australian Government’s trade, investment and education promotion agency.
Through a global network of offices, Austrade assists Australian companies to grow their international business, attracts productive foreign direct investment into Australia and promotes Australia’s education sector internationally.
For more information on how Austrade can assist you, contact us on:
Australia ph: 13 28 78 | Email: info@austrade.gov.au
A list of Austrade offices (in alphabetical order of country) is also available.