Vietnam industries to remain open amid curbs

Several coal-consuming industries are likely to remain operational in Vietnam along with the power stations even as the government intensifies efforts to contain the coronavirus outbreak. But health-related precautions may result in labour challenges.

The country announced a series of orders yesterday aimed at ensuring social distancing for about two weeks. Vietnam has also temporarily closed its borders with neighbours Laos and Cambodia to restrict travellers, but not goods. The government has asked Vietnamese residents to stay at home, although they can still go out for food, essential items and urgent medical services. They may continue to work at production facilities, if due precautions are followed, but public transport services will be curtailed.

The intensified measures, which apply from 1-15 April, are not as severe as in some countries such as India where many industries are closed, severely denting the economy. "This is not a lockdown so factories will still operate," a Vietnamese government spokesperson told Argus.

Prime minister Nguyen Xuan Phuc said production facilities, the transport of production materials and other business and service establishments are not shut. But operating units will have to adhere to safety precautions during the outbreak. Public transport will be shut to minimise the movement from one locality to another and stop movement from epidemic areas to other localities. But shuttle buses for workers and transportation of production materials will still be allowed during the period.

The curbs mean that coal ports as well as coal-consuming industries can continue to operate, but some disruptions are likely given that fewer workers are likely to report for work, a market participant said. The precautionary measures come as Vietnam emerges as a key target for coal cargoes because sellers have been forced to divert or reschedule vessels at the request of Indian buyers who can no longer use the coal given the 25 March-14 April lockdown in their country.

The near-term outlook for Vietnam's economy remains uncertain, with the coronavirus outbreak likely to impact industry and manufacturing. Vietnam's GDP grew by 3.82pc in the first quarter of this year, the lowest in recent years, according to an estimate from the country's General Statistics Office. Fitch Solutions yesterday slashed its forecast for Vietnam's economic growth this year to 2.8pc from 6.3pc.

The curbs could also weigh on electricity generation as well as consumption, though power production rose to 54TWh in the first quarter, up from 50.3TWh a year earlier, on the back of new capacity, according to the GSO data. Notwithstanding the coronavirus-related disruptions, the government believes the economy is on a fundamentally strong footing, which should encourage industrial development and power generation.

State-run utility EVN has set a target to increase generated and purchased power output this year by 8.9pc compared with 2019 to 251.62TWh. The company's total power supply, including its own generation and power that it purchased, reached 231.1TWh last year, an increase of 8.85pc from 2018.

Vietnam commissioned 1.2GW of new coal-fired generation capacity last year to bring its total to 19.2GW. It is set to bring 2.1GW on line this year and has 3.7GW of capacity under construction that is scheduled to come on line in 2021 and another 3.2GW under construction to launch in 2022. A further 870MW is planned to come on line in 2022, although construction has not started.

By Saurabh Chaturvedi