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Fertiliser speculation coming back to hurt enterprises
Fertiliser producers and traders have 2mil tonnes of products unsold. Slow sales have forced a lot of enterprises to halt production.
Commenting about the fertiliser market at this moment, Nguyen Dinh Hac Thuy, Secretary General of the Vietnam Fertiliser Association, said:
As Vietnam has to import most fertiliser products, the performance of Vietnam’s fertiliser market depends on the world’s market. Prices have dropped to the deepest low after hitting the highest peak in early 2008. A lot of enterprises have been incurring heavy losses and have had to cut production. At the same time last year, the consumption volume was 70-80% of production, while the figure is just 40-50% now.
A paradox exists that while the world’s petrol and oil prices have been decreasing sharply, and fertiliser prices have also been on the decrease, the coal price has increased by 96%. This has led to production costs increasing. Higher production costs and lower sale prices of finished products have pushed many enterprises against the wall.
But many enterprises have incurred losses because they imported too much fertiliser when the prices were high, and are selling fertiliser now, when the prices are low, right?
It is true. Not only small- and medium-size enterprises have incurred losses due to the market price fluctuations. A lot of big enterprises, which tried to speculate fertiliser when the prices were sky high, have also lost several billion VND.
The enterprises hoped that they could launch fertiliser products in the winter-spring crop in order to get fat profit.
Products kept in stock for a long time may lose their quality. Will we be able to control the quality of products to be marketed and prevent enterprises from launching bad-quality products onto the market?
In general, imported fertiliser products can be kept for six months, while they will lose the initial quality after that. However, I have to say that only imports, mostly urea, may lose quality, while domestically-made products will not be affected.
I think that it will be very difficult to supervise the sale of fertiliser on the market; therefore, it would be better for farmers to keep cautious when purchasing products. Enterprises may mix domestically-made products which have high quality and imported products to sell to clients.
How do you think the fertiliser market will perform in the time to come?
Fertiliser is one of the products which have been influenced by the economic recession. In some countries in the world, the urea price has dropped to $115/tonne only, or nearly VND2,000/kg.
I think that the fertiliser market will not see big changes until the end of the first quarter of 2009. The price may move up a little when the winter spring crop begins; however, the prices will not climb to the high levels they did in the last time.
The Vietnam Fertiliser Association has sent a document to the government and Ministry of Finance, suggesting four measures to help fertiliser enterprises settle their problems: 1. Allow them to export fertiliser back to the markets which have high prices 2. Do not impose export tax 3. Allow them to extend the debt payment for production and trading companies 4. Slash lending interest rates and VAT for fertiliser companies until the end of Q1, 2009.
However, the Ministry of Finance has not replied yet.
TBKTVN
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