Vietnam is still now a fertilizer importer which will ship in between 2.4 and 2.6 million tons of fertilizer from abroad this year. However, the fertilizer projects in the pipeline will reverse the situation and promise reasonable fertilizer prices for farmers.

Capable of producing 980,000 tons a year, the local urea fertilizer industry can meet only half of the domestic demand. Since the past two years, however, PetroVietnam Fertilizer & Chemical Company, or PVFCCo in short, has made sustained effort to enter foreign markets. Late last month, PVFCCo—whose products have been widely known as Phu My urea fertilizers—turned its representative office in Cambodia into a full branch. This is seen as a step to paving the way for PVFCCo’s products to penetrate a foreign market in anticipation of a glut of local urea fertilizer consumption as of 2012.

At the end of this year, two more urea fertilizer plants will be commissioned in Ca Mau and Ninh Binh provinces. As such, the domestic urea production will be 2.34 million tons next year if all the plants run at full capacity.

Meanwhile, demand is forecast to be more or less 2 million tons. Vietnam’s urea fertilizer production is scheduled to reach 3.22 million tons by 2014 when the two projects to expand Cong Thanh and Ha Bac facilities are finished.

The current domestic fertilizer production is about 8.4 million tons, still lower than the estimated demand of between 9 and 9.5 million tons. However, in some market segments, supply has surpassed demand. For instance, the current NPK production capability is between 0.7 and 1.2 million tons, and phosphate fertilizer is half a million higher than the local demand this year. Contrarily, as Vietnam is lacking urea, DAP, SA and sulphur and potassium fertilizers, their imports are inevitable. During the first seven months of this year, 2.16 million tons of fertilizers has been shipped into Vietnam. However, the situation will soon change after the Vietnam National Chemical Group finishes off with its plans to build DAP, SA and potassium salt factories in the next few years.

Since 2009, Vietnam’s fertilizer consumption has remained stable, being more or less 9 million tons a year. Fertilizer market specialists have predicted that in two or three years, Vietnam’s fertilizer demand will be much the same with a margin of 3%. Meanwhile, domestic production capabilities continue to increase markedly. Finding export markets should therefore be included in fertilizer manufacturers’ priority business plans.

In line with this trend, as of 2005, Vietnam’s fertilizer imports have downscaled. That means that local fertilizer production has become more competitive in terms of both quality and affordability on the domestic market. The improvement is expected to pave the way for home-made fertilizers to penetrate regional economies, particularly, Cambodia and Laos.

The growth of the domestic fertilizer industry whose supplies are outpacing demand is likely to fulfill the promise of fertilizer exporting. For farmers, this is also positive as they will be able to buy fertilizers at more affordable prices.

Vietnam currently has to import urea, SA, DAP and potassium and sulphur fertilizer, which are input materials for production of NPK fertilizer. Moreover, most of the fertilizer imports are from China. In addition to high transport costs, these imports have to bear import tariff rates ranging from 7% to 35%, and thus increasing both domestic production costs and retail prices.

According to the Institute for Agricultural Development Policies and Strategies, as fertilizers are an input of agricultural production, the industry has been given quite a number of incentives. As a result, prices of domestically produced fertilizers, especially urea, can be further cut. Lower urea fertilizer prices will produce a chain effect on NPK fertilizer.

PVFCCo once attempted to maintain a price level of urea which was lower than the common price on the market. However, as PVFCCo could be able to supply only 40% of the market demand, its price policy failed to bring about a far-reaching effect and its products could not reach farmers’ hands. The fertilizer manufacturer has therefore abandoned the lower price policy to take measures to provide direct support to farmers instead.

Source: SGT