Mining Industry Snapshot 2020

Related reports:

Oil & Gas Industry Update 2019

Oil & Gas Industry Update 2018

Oil & Gas Industry Analysis 2017

1. Market overview

From 2015 to 2019, mining contribution to GDP fluctuated, ending up at $17.44 billion USD in
2019 (VND/ USD = 23,270) (GSO, 2020).

Vietnam’s mining contribution to GDP (bn USD), 2015 - 2019

17.31 17.54 17.44

15.71 16.07

2015 2016 2017 2018 2019

Source: GSO, 2020

Mining Industry Snapshot 2020 – v1 – 03/02/2020

Vietnam has a wide range of mineral resources, including oil & gas, coal, bauxite, etc.

 Oil & gas: in 2019, Vietnam produced an estimated of 11.07 million tons of crude oil and
10.21 billion m3 of natural gas (GSO, 2020). Last year, Vietnam exported 3.98 million
tons of crude oil, valued at $2.03 billion USD (Vietnam's Customs, 2020).

Petro Vietnam (PVN) – a state-owned enterprise – is a dominant player in the oil & gas
sector. According to the law, PVN is entitled to an equity stake in all upstream projects
in Vietnam. PVN typically teams up with foreign companies such as ExxonMobil,
Gazprom, Rosneft, etc. to explore and produce oil & gas.

 Coal: coal output amounted to 46.137 million tons last year (GSO, 2020). Vietnam
mainly uses coal for its thermal power plants. It should be noted that Vietnam is no
longer self-sufficient in coal. Last year, Vietnam imported 43.85 million tons of coal,
valued at $3.79 billion USD (Vietnam's Customs, 2020).

As a state-owned enterprise, the Vietnam National Coal-Mineral Industries Group

(Vinacomin) is a pre-eminent coal producer in Vietnam. In 2019, Vinacomin posted sales
(estimated) of $5.67 billion USD (Vinacomin, 2019). The company produced 40.5 million
tons of coal last year.

 Bauxite: is the primary source of aluminum. As of 2018, Vietnam had the third largest
bauxite reserves in the world (Statista, 2020). Bauxite is mostly concentrated in Central
Highlands (Tay Nguyen). Currently, Vietnam has two bauxite projects, including Tan Rai
(Lam Dong) and Nhan Co (Dak Nong). Developed by Vinacomin, both projects are
saddled with cost overruns, technology issues, and environmental concerns (Thanh Nien
News, 2019).

 Others: include tungsten, titanium mineral sands, phosphate (apatite), copper, iron ore,
tin, chromite, gold, rare earths, etc.

Mining Industry Snapshot 2020 – v1 – 03/02/2020

Apart from Vinacomin and PVN, other mineral producers include Masan Resources (tungsten,
fluospar, bismuth, copper), Asian Mineral Resources (nickel), Vietnam Apatite Limited Company
(apatite), Besra (gold), etc.

Regarding regulation, the Ministry of Natural Resources and Environment (MONRE) and the
Ministry of Industry and Trade (MOIT) are the competent authorities for mineral resources in
Vietnam. The MONRE handles applications for mining licenses, certifies mineral resource
assessments, etc. The MOIT specifies the conditions and standards for mineral exports. The
2010 Mineral Law is the most important legal document. The 2010 Mineral Law regulates
surveying, mineral exploration & extraction, mine management, etc.

2. Outlook

Over the next few years, mining output is projected to decelerate. Challenges include resource
depletion, technology, inadequate regulation, lack of transparency, and environmental
concerns.

 Resource depletion: is particularly pressing in the oil sector. Bach Ho, the main oil field
in Vietnam, has witnessed gradual deterioration. The shortage of funding at PVN also
means that exploration and production activities will remain limited.

 Technology: issues range from obsolete technology to low levels of mechanization,

weak infrastructure, limited productivity, too much energy consumption, safety risks,
etc.

 Regulation: while the Mining Law 2010 has provided a basic regulatory framework,
there are gaps in the regulation (Sai Gon Giai Phong, 2017). For example, there is no
detailed regulation on partnership and changes of ownership in mining projects.

Mining Industry Snapshot 2020 – v1 – 03/02/2020

  Transparency: according to a research by Vietnam Chamber of Commerce and Industry,
Vietnam’s mining suffers from imprecise financial disclosure, questionable reports on
mining reserves, limited information on the development plan of mining, and lack of
transparency on social and environmental responsibilities (Vietnam News, 2017). In
addition, mining companies reported that they had to pay “unofficial fees” more than
other sectors.

 Environmental concerns: can arise from mining projects. For example, a local
government in Ha Tinh recently asked to shut down Thach Khe iron mine to protect the
environment (Vietnam News, 2018) .

3. Implications for Korean companies

Korean companies are not particularly active in Vietnam’s mining. In 2019, ECOPRO BM(Korea)
and Black Stone Minerals(Australia) signed a MOU to develop Ta Khoa Nickel Project in
Northern Vietnam (Thelec, 2019). The two companies aimed to obtain raw materials for battery
such as nickel and cobalt. In addition, there are Korea National Oil Corporation (KNOC) and SK
Innovation that have been involved in Vietnam’s oil & gas.

There are opportunities for Korean companies in terms of mining equipment and construction.
Thanks to advanced engineering levels, South Korea can export modern mining equipment to
Vietnam. Korean firms can take advantage of the preferential tariffs under Vietnam – Korea
Free Trade Agreement (VKFTA). At the same time, Korean construction companies can serve as
construction contractors in large mining projects. Already, GS E&C, SK E&C, and Posco E&C have
taken part in major industrial projects in Vietnam.

Mining Industry Snapshot 2020 – v1 – 03/02/2020

Abbreviations

CAGR Compound Annual Growth Rate

E&C Engineering & Construction

GDP Gross Domestic Product

GSO General Statistics Office

MOIT Ministry of Industry & Trade

MONRE Ministry of Natural Resources & Environment

MOU Memorandum of Understanding

PVN Petro Vietnam

Vinacomin Vietnam National Coal-Mineral Industries Group

Mining Industry Snapshot 2020 – v1 – 03/02/2020