High fertiliser prices sow seeds of despair

Hanoi-based Hanexim, one of Vietnam’s biggest fertiliser importers, told VIR that the world’s average price since mid-October this year had soared by over 30 per cent, particularly urea fertiliser’s prices which  had spiked  by 41 per cent. Meanwhile, the average fertiliser price in Vietnam had augmented by 10-15 per cent, against the same period last year.

For example, the average fertiliser price of Phu My Fertiliser Company and Hanexim had increased by 11 and 10-15 per cent, respectively.

“Not only Hanexim, but all local fertiliser producers and importers are also suffering from financial losses, based on the world’s existing import prices,” said Hanexim representative Pham Thi Hoa.

“Hanexim does not dare to boost its imports, though the local demand is on the rise. Hanexim may gain almost no profit in 2010,” Hoa said.

The world’s fertiliser price hikes were ascribed to China, which is among the world’s largest suppliers of fertilisers, particularly urea and phosphate fertilisers and expected to continue its policy to cut fertiliser exports this year.

China levies about a 7 per cent tariff on urea exports during the non-peak seasons, which run from July, 1 to September, 15 and from October, 16 to January, 31 and 110 per cent during the rest of the year, the peak season. China may advance the start of the peak season to December, 1 this year, lower the base prices for urea and diammonium phosphate, which would effectively raise the non-peak tariff for urea to 10 per cent during non-peak season, according to Bloomberg.

Gavin Ju, a consultant at analysis group CRU, was recently reported by Bloomberg as saying that China might cut fertiliser exports including urea and diammonium phosphate this year to boost local supplies.

Besides, many Chinese fertiliser companies had temporarily stopped operations for maintenance, said Vietnam Fertiliser Association’s (VFA) vice chairman Nguyen Dinh Hac Thuy.

He said reduced shipments from China, coupled with the appreciated yuan, came amid Vietnam’s increasing need in fertiliser imports and the country’s shortages of foreign currency to import fertilisers.

Since late last year, US dollar exchange rate with the local currency had strongly fluctuated and increased by 10 per cent. Fertiliser-related transport and service costs have also augmented by 15-20 per cent.

“All these factors will continue directly hurting Vietnam’s fertiliser industry,” Thuy said.

According to the Ministry of Industry and Trade (MoIT), Vietnam’s fertiliser imports had been slashed by 58.4 per cent since early this year. Since mid September, average world fertiliser prices increased by $40 over $100 per tonne, while that in Vietnam has augmented in between VND1,000-3,000 per kilogramme.

Vietnam’s demand for assorted fertilisers in 2010 is about nine million tonnes. The country can meet its demand for phosphate and NPK. However, it has to import half of its needed urea fertiliser, 70-80 per cent of needed DAP and the whole SA and potassium fertilisers (600,000-700,000 tonnes) from foreign countries.

Last week, the MoIT, Ministry of  Agriculture and Rural Development and VFA jointly asked the State Bank to list fertiliser as an item to enjoy exchange rate and foreign currency priorities to tame soaring fertiliser prices.