Market and product
Domestic fertilizer market to see the reverse soon
VietNamNet Bridge – Vietnam remains a big fertilizer importer with theexpected imports of 2.4-2.6 million tons in 2011. However, the situation wouldcompletely change in the future, as a lot of fertilizer projects are underimplementation.
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In late July, PVFCCo upgraded its representative office in Cambodia into abranch, which has been described as a move to pave the way for exportingnitrogenous fertilizer. The producer is trying to expand the consumptionmarkets, because it has anticipated the surplus in the fertilizer supply whichmay occur from 2012.
Vietnam expects to have two new nitrogenous fertilizer plants to be located inCa Mau and Ninh Binh provinces. If all the operational plants run at fullcapacity, the nitrogenous fertilizer output in the next year would reach 2.34million tons. Meanwhile, the consumption level would be just around two milliontons.
Especially, the total production capacity would reach 3.22 million tons afterthe Cong Thanh and Ha Bac projects complete their expansion.
Now Vietnam can churn out 8.4 million tons of fertilizer in total. Though thefigure is still lower than the demand estimated for the whole year 2011 at 9-9.5million tons, the oversupply has been seen in some kinds of products. NPKsupply, for example, has exceeded the demand by 0.7-1.2 million tons, whilephosphate by 0.5 million tons.
Meanwhile, Vietnam is still lacking nitrogenous fertilizer, DAP, kali, SA andsulfur, and it needs to keep importing the products.
The total import turnover in the firs seven months of the year reached 2.16million tons. However, the situation will change soon after the Vietnam ChemicalGroup completes its projects on building DAP, DAP and kali factories in the timeto come.
The demand for fertilizer in Vietnam has been stable since 2009, around 9million tons per annum. Experts believe that the demand would keep stable in thenext 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 forexport markets right now.
The fertilizer imports tend to decrease since 2005, which means that thedomestic production can meet the requirements in terms of quantity and prices.Therefore, producers have every reason to believe that they can reach out toneighboring markets of Laos and Cambodia.
Currently, Vietnam only imports nitrogenous, kali, SA, DAP and sulfur, but theyare the important input materials to make NPK. The majority of imports come fromChina, for which importers have to pay transport costs and the tax rates of 7-35percent. The expenses all make the production costs and the domestic retailprices 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, canenjoy a lot of preferences. It is within the reach of domestic producers toslash the sale prices, especially the prices of nitrogenous fertilizer. Once thenitrogenous fertilizer price decreases, the prices of other products would alsodecrease as the result of the domino effects.
In the past, PVFCCo once sold nitrogenous fertilizer at the prices lower thanthe average market prices. However, since it held only 40 percent of the marketshare, the low pricing policy could not help lower the market prices
