Imports hurting domestic fertiliser producers
Imports hurting domestic fertiliser producers
Domestic fertiliser producers are facing many difficulties to make their business viable in the face of fierce competition from importers, according to the Vietnam Competition Authority (VCA).
In a report on the possibility of applying trade defence instruments for imported urea and diammonium phosphate (DAP) fertilisers sent to its authorised body, the Ministry of Industry and Trade, VCA said the import of such fertilisers had sharply increased since early this year, affecting domestic production.
According to primarily analysed data, VCA said the main reason for heavy losses incurred by domestic fertiliser producers was the suddenly increased import of fertilisers.
The price of imported fertilisers is cheaper than the domestic rate because of the world's prices of input materials such as coal and gas, which have sharply reduced. This had resulted in domestic consumers buying imported fertilisers, mainly from China.
In the first nine months of this year, Viet Nam imported 443,000 tonnes at a total value of US$103 million, a year-on-year increase of 60 per cent and 16 per cent, respectively.
VCA said Viet Nam had two DAP fertiliser producers – Dinh Vu DAP Joint Stock Company and Lao Cai Fertiliser DAP No 2 Joint Stock Company. They had been incurring significant losses since 2013 due to the rapid increase of imported products. They had to continuously reduce selling price to match the rate of imported products and were forced to maintain it at a rate lower than the production price.
Competition with imported products has caused domestic DAP producers to cut productivity by half since early this year. Meanwhile, consumption productivity and average selling price also reduced by more than 40 per cent and 23.8 per cent, respectively, compared with the same period last year.
The import of DAP fertiliser this year was estimated to make a year-on-year increase of 184.6 per cent, VCA said.
VAC recommended that if there was no method to help the two DAP producers overcome difficulties, it would be difficult for them to be viable, leading to the possibility of them being unable to control fertiliser prices for domestic agriculture.
There are four urea producers in Viet Nam – Ca Mau Gas-Power-Fertiliser Industrial Group and Phu My Fertiliser Plant, which have annual production capacity of 800,000 tonnes each, and Ha Bac Nitrogenous Fertiliser and Chemicals Company Limited and Ninh Binh Nitrogenous Fertiliser Plant, with the capacity of 480,000 tonnes and 560,000 tonnes per year, respectively.
Phu My and Ca Mau plants, which have used gas as input material for fertiliser production, still benefit from production with the selling price at VND5,600 (25 cents) per kg, higher than the production price of between VND4,500 and VND4,800. However, profits were seen declining in recent times.
Ninh Binh and Ha Bac plants, which use coal as input material for production, have failed to compete with imported products. Ninh Binh plant has stopped its operation, while Ha Bac plant halted production in August and September due to inventory.
According to VCA's analysis, both urea and DAP were used for agriculture and the application of trade defence instruments should be considered because it would lead to the increase of input costs for the agricultural production industry.
