What is the future for coal-run fertilizer plants?

Tens of trillions of dong have been poured into Ninh Binh and Ha Bac in an ambitious plan to realize the goal of controlling fertilizer supply in the Red River Delta.

However, the plants have been bogged down in difficulties.

Ha Bac Fertilizer was praised as a ‘legend’ which made a great contribution to the economic development in the northern part of Vietnam in the last century.

In 2010, Hanichemco, which runs Ha Bac, kicked off avproject on upgrading and expanding the plant with investment capital of $568 million. As the company only had $102 million, it had to borrow VND5 trillion.

Under the project, the capacity of the plant would increase to 500,000 tons of urea, which included 320,000 tons from a new production line and 180,000 tons from an existing production line using coal dust.

In 2015, when the project became operational, the company took a heavy loss of VND675 billion, while it estimates the loss of VND488 billion this year.

Hanichemco initially planned to stop taking losses by 2019. However, analysts said that the company’s loss may be much higher than initially forecast in the context of the sharp fertilizer price fall and stiff competition in the market.

Ninh Binh, believed to be Vinachem’s largest project and advertised as using the most advanced European technology, is also meeting big difficulties.

Vinachem decided to build Ninh Binh with its capital of US$100 million and US$250 million worth of loans from Chinese Eximbank.

The plant became operational in 2012 and since then, it has been taking losses. By March 2016, when the plant announced it had to stop operation, the loss had reached VND2.7 trillion.

Analysts commented that bad business performance is the big problem of not only two large fertilizer plants, but also of the industry of making fertilizer from coal.

The price of coal, the input material of the plants, has been increasing in recent years, while the price of urea, the product, has been decreasing sharply. In 2015, one ton of urea was sold at VND8.7 million, while it is now VND6 million only.

They also pointed out that the two plants became operational when the market became saturated. Vietnam needs 2 million tons of fertilizer a year, while four plants – Phu My, a Mau, Ha Bac and Ninh Binh – have the total capacity of 2.65 million tons.