Overproduction prompts Vietnam to consider exporting urea

Sep 3rd at 10:17

03-09-2012 10:17:40+07:00

Vietnam, the country which once relied completely on urea imports, has turned into the country suffering the overproduction, which has forced it to think of exporting the products.

From underproduction to overproduction

Nguyen Hong Vinh, General Director of the PVFCCo, a chemical and fertilizer manufacturer, which is owns Dam Phu My brand, said Vietnam would need some 2 million tons of urea this year, while the production capacity of the domestic plants is 2.6 million tons.

Therefore, domestic manufacturers have to think of boosting exports to ensure the outlet for their production and ease the negative impacts from the domestic competition.

The urea supply has increased sharply since the beginning of the year with the Ca Mau Fertilizer Plant with the designed capacity of 800,000 tons a year becoming operational since the second quarter. Meanwhile, the Ninh Binh fertilizer plant with the designed capacity of 560,000 tons, plans to market commercial products in the third quarter.

Analysts have warned that from 2013, Vietnam would have 450,000-700,000 tons of urea in excess, when the Ninh Binh plant becomes operational at full capacity and the Ha Bac Plant expands production to have the production capacity of 285,000 tons, which may be raised to 475,000 tons by 2015.

In the past, Vietnam was known as a big urea importer. Prior to 2004, Vietnam had to import 100 percent of urea products needed for domestic agricultural production. After the Phu My Fertilizer plant was put into operation in 2004, Vietnam could satisfy 50 percent of its demand.

Where to export urea?

In fact, urea manufacturers, anticipating the oversupply, have been trying to seek export markets over the last many years.

PVFCCo, the biggest manufacturer in Vietnam, has been trying to boost exports to neighboring countries. Vinh said the corporation in 2011 opened a branch in Cambodia and began developing the distribution network, while it plans to open a representative office in Myanmar.

Vinh said that the biggest advantage of Vietnam is that it is located near the big fertilizer consumption markets including Thailand, Cambodia, the Philippines and Myanmar. Therefore, Vietnam’s fertilizer products would be more competitive than the products from the Middle East and Baltic area, which remain the biggest urea exporters in the world, from which Vietnam imported urea in big quantities in the past.

Also according to Vinh, it takes 3-5 days only to carry cargo from Vietnam to ASEAN countries, while it would take 40-50 days to carry cargo to the Middle East and Baltic area.

Dr Mai Van Quyen, a well-known agriculture expert, has pointed out that Cambodia, with 4 million hectares of land for agricultural production, should be seen as a big market for Vietnam’s urea exports.

In the past, Cambodian farmers cultivated one crop a year. Nowadays, nearly 500,000 hectares of land have been reserved for 2-3 crop cultivation, which means that the demand for urea would increase sharply.

However, it would be really very difficult to reach out to the ASEAN markets.

Myanmar is considered a good targeted market, because the production in the country can only satisfy 10 percent of the demand. However, Vietnamese manufacturers have been warned that they would face the sub-standard finance & banking system, poor logistics infrastructure and the limited foreign currency reserves for payment for imports. Besides, they would also have to compete with the smuggled imports from China.

According to the General Department of Customs, Vietnam exported 425,000 tons of fertilizer of different kinds in the first six months of the year, worth 188 million dollars.