Mr. Phung Ha, Vice Chairman and General Secretary of the Vietnam Fertilizer Association, said that fertilizer prices started to skyrocket in 2020 until now. That was also the strongest increase in the past 50 years.
According to Mr. Ha, one of the reasons for the positive business results of fertilizer companies is the high selling price compared to previous years due to the impact of the Covid-19 pandemic, a sharp increase in freight charges, and oil and natural gas prices rising.
From a business perspective, Ms. Nguyen Thi Hien, Deputy Director General of the Ca Mau Petroleum Fertilizer Joint Stock Company, said that in 2022, all input costs of the fertilizer industry increased, leading to high prices. The market price also increased.
However, besides their positive impact, a prolonged period of high fertilizer prices has been reducing the demand for fertilizer.
The demand in Vietnam in 2022 is estimated to have decreased by 20-30%, leading to many difficulties in domestic consumption. Domestic consumption is much lower than in the same period of previous years, forcing domestic manufacturers to seek opportunities and boost exports to ensure inventories and maintain production.
According to the Ministry of Agriculture and Rural Development, fertilizer exports officially hit the milestone of more than 1 billion USD since the beginning of the year, reaching more than 1.6 million tons. Vietnam's fertilizer products have been exported to many markets worldwide, such as France, India, South Asian countries, etc. Vietnam's fertilizer has also made its presence in markets as far away as South America, Peru, Mexico, the United States, etc.
The favorable export of fertilizers has made several big names in the fertilizer industry, such as Phu My Fertilizer, Ca Mau Fertilizer, and several units in the Vietnam Chemical Group, such as Southern Fertilizer, Binh Dien Fertilizer, etc., recorded high profits.
When analyzing the reasons for the increase in fertilizer exports, Ms. Hien said that in 2022, agricultural production in big countries grew, leading to a sharp rise in demand for fertilizer. On the one hand, farming was more favorable due to the mild weather.
In addition, countries that focus on food security policies have increasingly promoted reserves. They consume a large amount of key agricultural products such as rice, wheat, cereals, and soybeans.
Another reason for the increase in selling prices was the influence of the war between Russia and Ukraine. Increasing gas prices pumped up fertilizer prices, and the USD exchange rate has also risen sharply since the beginning of the year. Those advantages helped Vietnam's fertilizer export turnover reach more than 1 billion USD, equivalent to about 1.6 million tons.
In 2023, Vietnam's fertilizer industry is forecasted to continue facing unending issues.
The price of raw materials has skyrocketed, the gas supply is scarce from Asia to Europe, and input costs have increased all at once. Therefore, fertilizer prices cannot be reduced.
With the Russia-Ukraine conflict continuing, the global economy facing difficulties, and the risk of epidemics remaining, the Ministry of Agriculture and Rural Development forecasts that the fertilizer market will continue to be complicated in the coming time, unpredictable in price and supply. Especially with potassium fertilizers provided by Russia and Belarus, accounting for nearly 50% of the global demand. Meanwhile, Vietnam is dependent on imported sources for this type of fertilizer.
According to Ms. Hien, the conflict is still persistent, and global energy security is still facing challenges. At the beginning of 2023, gas may continue to be scarce, so the price will also maintain a high level. Fertilizers are under the same pressure and will increase accordingly. The selling price cannot compensate for input costs. Hence, many places have to cut ammonia or urea production, causing a shortage of world fertilizer supply.
Meanwhile, the total capacity of domestic factories is abundant and can meet export well. Therefore, there is still a lot of room for the industry, and the value will increase in early 2023.
In a recent analysis, Agriseco Research assessed that when China opens up its economy, it can restore production output and remove export restrictions.
Many experts predict that this may cause fertilizer prices to continue to cool down in 2023 and affect the export situation of enterprises. Because once China opens its economy, restores production, and lifts export restrictions, it will likely launch a huge amount of goods, including fertilizers of all kinds.
However, many of Vietnam's fertilizer companies believe that while the impact from China is there, expecting a sharp price drop is unlikely. Although China has lifted the ban on urea exports from the end of June 2022, export activities are still very limited to ensure domestic supply. They plan to focus on producing domestically before going global.
Compiled by VietnamCredit