Fertilizer manufacturers are reviving

After years of taking a loss, since the first quarter of 2018, four fertilizer plants of the Vietnam Chemicals Group (Vinachem) have seen losses decreasing following the restructuring and the lowering of production costs.

Ninh Binh Fertilizer’s loss decreased by VND8 billion, Ha Bac Nitrogenous Fertilizer and Chemicals VND88.75 billion, DAP-Vinachem VND53.501 billion, and DAP 2 – Vinachem VND183 billion.

The latest report of Vinachem to the government showed that production and business performances of all four companies are improving with growth in industrial production, increase in revenue and decrease in losses.

However, analysts pointed out that Vietnamese fertilizer manufacturers are still facing difficulties.

Ninh Binh Fertilizer said that it is seriously lacking working capital. Vinacomin, the coal supplier, doesn’t accept the deferred payment for coal, but has asked Ninh Binh to pay immediately on delivery, which has badly affected production.

Ninh Binh produces urea using coal as input materials. Meanwhile, the coal price has been fluctuating recently, thus increasing the production cost and weakening product competitiveness in comparison with Chinese imports.

Meanwhile, the designed capacity of nitrogenous fertilizer plants has exceeded demand, while Ca Mau and Phu My Fertilizer Plants runs at a capacity higher than the designed capacity.

Though the domestic supply is abundant, enterprises still keep importing products. The imports in April 2018 for the second consecutive month increased in both quantity and value.

According to GDC, Vietnam imported 489 thousand tons of fertilizer in the month, worth $144.6 million, increasing by 17.8 percent in quantity and 22.6 percent value compared with March.

As such, the total import volume in the first four months of the year reached 1.4 million tons, worth $405 million.

Nguyen Hac Thuy, acting chair of the Vietnam Fertilizer Association, said the changes in the VAT tax laws have caused problems for domestic fertilizer production and paved the way for foreign products to flood Vietnam. 

Since 2015, fertilizer has no longer subject to 5 percent VAT. This means that the VAT for input materials cannot be deducted and must be taken into production cost. As a result, the production cost has increased by 5-8 percent.

The changes of the tax laws has not helped farmers benefit from fertilizer prices, as initially planned.

Duong Tri Hoi, deputy CEO of PVFCCo, said because of the new tax laws, enterprises dare not use advanced technologies. As a result, foreign fertilizers and outdated technologies could flood in.

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Mai Thanh