Fertiliser companies smell success ahead in 2021
Fertiliser businesses have been predicted to flourish this year thanks to many positive supporting factors.
According to FPT Securities Co (FPTS), more frequent rainfall may happen in central and southern Viet Nam as a result of the La Nina weather phenomenon, and even during the dry season in the Central Highlands, leading to an increase in the area for agricultural cultivation and therefore demand for fertiliser.
The La Nina phenomenon can trigger storms and tropical depressions in the East Sea more frequently. These are also likely to affect the Vietnamese mainland more than usual, mostly towards the end of the year, the company said.
The second favourable factor is the current high price of agricultural products, which facilitates cultivation and the need for fertiliser.
By 2020, the price of agricultural products in the world increased sharply as demand for food hoarding soared due to the COVID-19 pandemic. As of November 2020, world rice prices had jumped by 33 per cent compared to January 2016 and by 16 per cent from the same period in 2019. Corn and soybeans also saw price increase of 14.5 per cent and 33.1 per cent, respectively.
The export price of white rice in Viet Nam is currently at the highest level in the past five years. As of early December 2020, Viet Nam's export price for 5 per cent broken white rice jumped to US$516 per tonne, up 45.4 per cent year-on-year and 26.2 per cent higher than the average of the last five years. The current rice price is higher than the mark of $450-490 per tonne for the same product from Thailand and $376-382 per tonne of rice from India.
According to the Report on Commodity Market Outlook released in November 2020 by the World Bank, the world rice price in 2021 is expected to reach an average of $498 per tonne, 21.8 per cent higher than the five-year average from 2016-2020.
Rice is the crop with the greatest influence on fertiliser demand in Viet Nam. High rice prices encourage farmers to increase production and expand cultivated areas. With the favourable weather conditions in 2021, farmers are predicted to be in great need of fertiliser.
According to AgroMonitor, total fertiliser consumption in 2021 is expected to reach 10.3 million tonnes, up 5.5 per cent compared to 2020. Consumption of most fertilisers is forecast to increase significantly compared to 2020, especially diammonium phosphate (DAP) fertiliser up 12 per cent, phosphate fertiliser up 8.7 per cent, NPK fertiliser up 4.6 per cent, urea fertiliser up 0.5 per cent, potassium fertiliser up 2.4 per cent and other fertilisers up 10.3 per cent.
In 2020, shares of Petrovietnam Fertiliser and Chemicals Corporation (DPM) increased 58 per cent, shares of PetroVietnam Ca Mau Fertiliser JSC (DCM) soared by 126 per cent and shares of Binh Dien Fertiliser Joint Stock Company (BFC) also recorded an impressive increase of 70 per cent.
Despite the poor business results in 2020, shares of Lam Thao Fertilisers and Chemicals JSC (LAS) still recorded a rise of 17 per cent.
LAS faced many difficulties in competing with high-quality products of competitors in the northern region - the main market of LAS. The inability to cut selling and administrative expenses also led to a drop in its profit, making a loss of VND4.7 billion in the first nine months of 2020.