Domestic fertilizer market to see the reverse soon

Vietnam remains a big fertilizer importer with the expected imports of 2.4-2.6 million tons in 2011. However, the situation would completely change in the future, as a lot of fertilizer projects are under implementation.

With the current production capacity of 980,000 tons, the nitrogenous fertilizer output just can meet 50 percent of the domestic demand. Therefore, it is really a big surprise that PVFCCo, the producer of Phu My brand products, is trying to seek markets to export its products.

In late July, PVFCCo upgraded its representative office in Cambodia into a branch, which has been described as a move to pave the way for exporting nitrogenous fertilizer. The producer is trying to expand the consumption markets, because it has anticipated the surplus in the fertilizer supply which may occur from 2012.

Vietnam expects to have two new nitrogenous fertilizer plants to be located in Ca Mau and Ninh Binh provinces. If all the operational plants run at full capacity, the nitrogenous fertilizer output in the next year would reach 2.34 million tons. Meanwhile, the consumption level would be just around two million tons.

Especially, the total production capacity would reach 3.22 million tons after the Cong Thanh and Ha Bac projects complete their expansion.

Now Vietnam can churn out 8.4 million tons of fertilizer in total. Though the figure is still lower than the demand estimated for the whole year 2011 at 9-9.5 million tons, the oversupply has been seen in some kinds of products. NPK supply, for example, has exceeded the demand by 0.7-1.2 million tons, while phosphate by 0.5 million tons.

Meanwhile, Vietnam is still lacking nitrogenous fertilizer, DAP, kali, SA and sulfur, and it needs to keep importing the products.

The total import turnover in the firs seven months of the year reached 2.16 million tons. However, the situation will change soon after the Vietnam Chemical Group completes its projects on building DAP, DAP and kali factories in the time to come.

The demand for fertilizer in Vietnam has been stable since 2009, around 9 million tons per annum. Experts believe that the demand would keep stable in the next two or three years with the modest increases of no more than three percent. Meanwhile, the domestic production capacity has been increasing rapidly. Therefore, it is understandable why domestic producers now have to look for export markets right now.

The fertilizer imports tend to decrease since 2005, which means that the domestic production can meet the requirements in terms of quantity and prices. Therefore, producers have every reason to believe that they can reach out to neighboring markets of Laos and Cambodia.

Currently, Vietnam only imports nitrogenous, kali, SA, DAP and sulfur, but they are the important input materials to make NPK. The majority of imports come from China, for which importers have to pay transport costs and the tax rates of 7-35 percent. The expenses all make the production costs and the domestic retail prices of import products higher than the prices of domestic products.

It is clear that domestic products have competitive advantages in prices, because fertilizer production, which serves the agricultural production, can enjoy a lot of preferences. It is within the reach of domestic producers to slash the sale prices, especially the prices of nitrogenous fertilizer. Once the nitrogenous fertilizer price decreases, the prices of other products would also decrease as the result of the domino effects.

In the past, PVFCCo once sold nitrogenous fertilizer at the prices lower than the average market prices. However, since it held only 40 percent of the market share, the low pricing policy could not help lower the market prices.

Source: TBKTSG

Tags: Vietnam fertilizer industry