vietnam fertilizer industry report q3/2018...fertilizer prices tend to rise again due to high demand...

VIETNAM FERTILIZER INDUSTRY REPORT Q3/2018

Executive summary 4

1. Business environment 6

1.1 Macroeconomic situation 7

1.2 Legal framework 10

1.3 Trade agreements 18

2. Industry overview 21

2.1 Situation of fertilizer industry in the world 21

2.1.1 Supply demand 22

2.1.2 Import export 23

2.1.3 Price movement 25

2.1.4Production and consumption situation in some typical

countries27

2.2 Vietnam fertilizer industry situation 33

2.2.1 History of Vietnam fertilizer industry 34

2.2.2 Definition and Classification 35

2.2.3 Scale and Characteristics of market 38

2.2.4 Main activities 39

2.2.5 Input materials 41

Content

2.2.6 Production technology 45

2.2.7 Supply demand 48

2.2.8 Import export 55

2.2.9 Inventory 62

2.2.10 Price movement 63

2.2.11 Transport and distribution 65

2.3 Industry risks 67

2.4 Planning and forecast 76

2.4.1 Planning 77

2.4.2 Global forecast 80

2.4.3 Domestic forecast 82

3. Enterprise analysis 84

3.1 Top 10 enterprises 84

3.2 Target group of business results 94

3.3 Target group of finance 100

3.4 Target group of cash flow 105

4. Appendix of financial statements 107

2

3

ADB Asia Development Bank

EVN Vietnam Electricity

FAO Food and Agriculture Organization

FAV Fertilizer Association Vietnam

FDI Foreign Direct Investment

FIA Foreign Investment Agency

GDVC General Department of Vietnam Custom

Abbreviation

GSO General Statistics Office

MOT Ministry of Transport

MARD Ministry of Agriculture and Rural Development

VinacominVietnam National Coal and Mineral Industries Holding

Corporation Limited

UN comtrade United Nations Database of Trade Statistics

VIRAC Vietnam Industry Research and Consultancy

Fertilizer market continues to oversupply,

estimated supply of nutrition by fertilizer

ingredients increased to 3.4% while demand

increased slightly by 0.6%

Asia and the Americas are the largest

fertilizer consuming regions in the world,

Fertilizer prices tend to rise again due to high

demand while supply is scarce and the impact

of raw material costs and transportation (due

to rising oil, gas and coal prices).

Average supply exceeds the demand.

Vietnam fertilizer production has focused on

the single and mixed market for NPK and

DAP

Fertilizer consumption tends to decrease over

the years

Fertilizer imports have fluctuated

continuously over the years

Asian countries continue to be the main

export markets of Vietnam.

Executive summary

4

Content is intentionally removed for demo purpose

Executive summary

5

Fertilizers are in a saturated state, domestic

firms have to compete fiercely with imports,

while demand tends to fall, leading to

downward pressure in the 2016-2020 period.

In particular, Cambodia continues to be the main

export market,

Fertilizer inventories tend to increase over the

years, but the growth rate has been decreasing.


1. Business environment

1.1 Macroeconomic situation

1.2 Legal framework

1.3 Trade agreements

Content

6

7



Monthly CPI fluctuation, 2014 – 6/2018

Source: VIRAC, GSO

Source: VIRAC, GSO

GDP growth, 2012 – 6M/2018• GDP in the first 6 months of 2018 is estimated to increase 7.08% over the

same period last year, the highest increase of 6 months since 2011.


8



Source: VIRAC

Source: VIRAC, SBV

VND/CNY exchange rate, 2016 - 6/2018

VND/USD exchange rate, 3/2015 - 6/2018




9

Source: VIRAC, GDVC

USD million

Source: VIRAC, GDVC

Export- Import by quarter, Q1/2015 – Q2/2018

Structure of export commodities, 6M/2018




1.2 Legal framework


Content

10

• Circular No. 36/2010/TT-BNNPTNT

• Decree No. 163/2013/ND-CP


1.2 Legal framework - Group of regulations on production, trading and use of fertilizers

11


• Decree No. 202/2013/ND-CP



12




13



1.2 Legal framework - Group of regulations on taxes of fertilizer import and export

14




15




16


• On June 2, 2018, the Ministry of Finance said that in the draft law to amend and supplement some articles of the 6 Laws on tax, fertilizer will be

subject to VAT at the preferential tax rate of 5%.



17



1.2 Legal framework


Content

18

19

Vietnam's integration process since 1995 to date

As of Q2/2018, Vietnam had signed, implemented, and has been negotiating a total of 17 free trade agreements (FTAs). Accession to international trade

agreements brings opportunities and challenges for domestic firms.






20

Export taxes in 2016 Export taxes applied

since 10/5/2016

Tariffs under the Vietnam-EU trade agreement


Content

2. Industry overview

2.1 Situation of fertilizer industry in the world

2.2 Vietnam fertilizer industry situation

2.3 Industry risks

2.4 Planning and forecast

21


2.1 World fertilizer market – 2.1.1 Fertilizer supply-demand

22

Demand by nutrient and nutrient supply, 2015 – 2017e

Source: VIRAC, FAO

Million tons


Over the years, urea exports have been steadily increasing, mainly from

countries in West Asia and East Asia.


2.1 World fertilizer market – 2.1.2 Import export

23

Source: VIRAC, Trademap

USD billionFertilizer exports, 2012 - 2017e


24

Top fertilizer exporting countries, 2016 - 2017

Source: VIRAC, UN comtrade Source: VIRAC, UN comtrade

China is a country in the top import and export countries


2.1 World fertilizer market – 2.1.2 Import export

Top fertilizer importing countries, 2016 - 2017

Country 2016e 2017e Growth Country 2016e 2017e Growth


Fertilizer prices tend to rise again due to high demand but supply scarcity and the impact of raw material and transportation costs (due to rising oil, gas and

coal prices).


2.1 World fertilizer market – 2.1.3 Price movement

25

USD/tonPrice movement of main fertilizers in the world, 1/2012 – 6/2018

Source: VIRAC, Worldbank



2.1 World fertilizer market – 2.1.3 Price movement

26



2.1 World fertilizer market – 2.1.4 Situation of fertilizer industry in countries

27

China - world leader in fertilizer production

Fertilizer production in China continues to grow low

Source: VIRAC, The Wall Street Journal

USD billion

Top largest fertilizer enterprises in China, 2017




28

Source: VIRAC, Trademap

USD thousand

Export 2017 2018

Source: VIRAC, Fert

Change in fertilizer export tax rate, 2017 - 2018

Fertilizer exports in China are forecasted to continue to fall in the coming years. Import and export of fertilizers from China, 2010 - 2017


29

The impact of the environmental tax on the Chinese fertilizer industry

in 2018.

Environmental tariffs are expected to continue to increase in the future.

High Medium Low

Air

pollution

Water

pollution

Environmental taxes in China, 2018

Source: VIRAC, Integer ResearchContent is intentionally removed for demo purpose





30

India

Fertilizer demand is increasing

Source: VIRAC, Centre for Monitoring Indian Economy

Million tons

Imports of fertilizers by type in India, 2015 - 2017Content is intentionally removed for demo purpose

Impact of cost of production on fertilizer industry in India



31

Perspectives on India fertilizer industry

Source: VIRAC, Fertilizer Association of India

Structure of fertilizer production in India by type, 2012 - 2017


There are also other countries that also have large-scale fertilizer production:

United States

Russia

Canada

Germany

Brazil



32


Content




2.3 Industry risks


33


2.2 Vietnam Fertilizer Industry – 2.2.1 History of Industry Development

34


Classified according to the nutrient

requirements of plants

Classified according to source


2.2 Vietnam Fertilizer Industry – 2.2.2 Definition and Specification

35

Structure of major fertilizers 2014


Name of fertilizer Chemical composition Characteristic Type of suitable land



36


Name of fertilizer Chemical composition Characteristic Type of suitable land



37



2.2 Vietnam Fertilizer industry– 2.2.3 Scale and characteristic of market

38

Fertilizer industry revenue, 2010 - 2016

VND billion

Source: VIRAC, GSO Source: VIRAC, GSO

Share by revenue, 2016



2.2 Vietnam Fertilizer industry– 2.2.4 Main activities

39



2.2 Vietnam Fertilizer industry– 2.2.4 Main activities

40


Source: VIRAC,Vinacomin

Source: VIRAC,Vinacomin

Market segment of coal consumption

Coal reserves are concentrated in the Red River Delta coal basin and the coal used in fertilizer production accounts for 4% of the coal consumption

market.


2.2 Vietnam Fertilizer industry– 2.2.5 Input material

41

Coal reserves by area




42

Million tonnes

Forecast for coal supply and demand in the period 2015-2030


The reserves of apatite ore are plentiful and meet the demand

Source: VIRAC, Vietnam Chemical GroupSource: VIRAC, Vietnam Chemical Group



43

Thousand tonnes

Thousand tonnes

Forecast for ore demand for fertilizer, 2015 - 2030Exploration ore reserves in 2014


Domestic gas production will meet demand until 2076, the annual plant consumption of 1 billion m³ to produce 1.6 million tonnes of Urea

Source: VIRAC, Vietnam Gas Corporation



44

Market segment of natural gas consumption


Technology Advantage Disadvantage Using businesses

Production technology of NPK


2.2 Vietnam Fertilizer industry– 2.2.6 Production technology

45


Production technology of Urea



46


Production technology of DAP

Production technology of Phosphate



47



2.2 Vietnam Fertilizer Market – 2.2.7 Supply demand

48

Million tonsSupply - Demand, 2012 – 6M/2018e

Production and consumption of domestic producers,

2012 – 6M/2018e

Source: VIRAC, GSO, MARD, GDVC

Source: VIRAC, GSO, MARD, GDVC

Million tons




49

Fertilizer production, 2012 – 6M/2018e

Source: VIRAC, GSO

Million tons




50

The impact of tax policies on domestic production


51


• On June 2, 2018, the Ministry of Finance said that in the draft law to amend and supplement some articles of the 6 Laws on tax, fertilizer will be subject

to VAT at the preferential tax rate of 5%.





Source: VIRAC

52

Fertilizer production capacity of big domestic enterprises, 6/2018




53

Source: VIRAC

Factory Capacity




54

Million tons

Source: VIRAC, GSO, MARD

Demand and consumption of fertilizer, 2012 - 6M/2018e


Source: VIRAC, GDVC, MARD


2.2 Vietnam Fertilizer Market – 2.2.8 Import export

55

Fertilizer imports, 2012 – 6M/2018e

Fertilizer imports have fluctuated continuously over the years as a result of domestic demand - supply and import and export tax policies as well as

major import markets.

Thousand tons




56

Source: VIRAC, MARD, GDVC


Thousand tonsFertilizer imports, 6M/2017 / 6M/2018e

Fertilizer imports by type, 6M/2018e




57


Import structure of fertilizer by countries, 6M/2018




58

Prices of some types of imported fertilizer 6M/2018

Type of fertilizer Average unit price

6M/2018

Unit: USD

Source: GDVC

Structure of importing fertilizer enterprises, 6M/2018

Source: GDVC




59

Million tons

Fertilizer exports, 2012 – 6M/2018e





60

Source: VIRAC, GDVC

Thousand tons

Source: VIRAC, GDVC

Fertilizer exports by country, 6M/2018e Fertilizer exports by country, 6M/2017 - 6M/2018e




61

Temporary import for export by type, 6M/2017

Type of fertilizer Share

Source: VIRAC, GDVC

Source: VIRAC, GDVC

Type of fertilizer Share

Vietnam fertilizer exports by type, 6M/2017

Fertilizer exports by origin, 6M/2018


Fertilizer inventories tend to increase over the years, causes are:


2.2 Vietnam Fertilizer Market – 2.2.9 Inventory

62

Source: VIRAC, GSO

Million tons

Fertilizer inventories, 2010 - 2017e


Ure and DAP prices have been fluctuating much in the first three months of 2018, specifically:

Source: VIRAC, VIETRADE- MOIT


2.2 Vietnam Fertilizer Market – 2.2.10 Price movement

63

* Price movements of main products (highest price) from Tran Xuan Soan market

VND

Price movement, 2014 - 6/2018



2.2 Vietnam Fertilizer Market – 2.2.10 Price movement

64



2.2 Vietnam Fertilizer Market – 2.2.11 Transport and distribution

65

Key seaports in Vietnam



2.2 Vietnam Fertilizer Market – 2.2.11 Transport and distribution

66


Content




2.3 Industry risks


67

Source: VIRAC, Worldbank

USD/ton


2.3 Industry risks

68

Coal, oil prices, 7/2011 – 5/2018

• Coal prices in Australia

• Average oil prices of Dated Brent, West Texas Intermediate and Dubai Fateh

Risk of input material prices


Weather influences the direction of impact and efficiency of fertilizer.


2.3 Industry risks

69


Risk of output sector

Source: VIRAC, MARD


2.3 Industry risks

70

Thousand ha

Structure of cultivation area, 2017 Area of paddy land for years, 2010 - 2014

Source: MNRE



2.3 Industry risks

71

Main agricultural products exports, 6M/2017 – 6M/2018

Source: VIRAC, MARD 2013

Thousand tons USD million

Source: VIRAC, MARD

Demand for fertilizer by crop


72

Source: VIRAC, MARD

Source: VIRAC, MARD

Thousand ha

Source: VIRAC, MARD

Thousand tons


2.3 Industry risks

Area of rice cultivation by season, 2017

Rice output by season, 2012 - 2017

Area of rice cultivation by region, 2012 - 2017



2.3 Industry risks

73



2.3 Industry risks

74



2.3 Industry risks – 5-forces analysis

75


Content




2.3 Industry risks


76

1. Planning the fertilizer production system

Decision No. 6868/QD-BTC approving the master plan for the development of the fertilizer production system and distribution system in the 2011-2020

period, with a view to 2025.


2.4 Planning and forecast – 2.4.1 Planning

77


2. Planning the fertilizer distribution system

3. Group of support solutions



78




79



2.4 Planning and forecast – 2.4.2 Global forecast

80

Forecast supply and demand of fertilizer by nutrients, 2017e - 2020f

Million tons

Source: VIRAC, FAO, IFA



2.4 Planning and forecast – 2.4.2 Global forecast

81

Fertilizer prices tend to decrease over the years mainly due to oversupply, which is caused by oversupply and falling prices of raw materials.



2.4 Planning and forecast – 2.4.3 Domestic forecast

82

Million tons

Source: VIRAC

Forecast of supply and demand, 2010 - 2020f



2.4 Planning and forecast – 2.4.3 Domestic forecast

83

The trend of developing high quality mixed fertilizers, organic fertilizers, replacing for low-tech fertilizers.


3. Enterprise analysis

3.1 Top 10 enterprises

3.2 Target group of business results

3.3 Target group of finance

3.4 Target group of cash flow

Content

84

Enterprise name AddressChartered capital

(VND million)

Total assets

(VND million)

Net revenue

(VND million)

1

2

3

4

5

6

7

8

9

Top 10 businesses with largest revenue in 2017

Source: VIRAC



85


Phu My Fertilizer Plant - PetroVietnam Fertilizer and Chemicals Corporation



86


Binh Dien Fertilizer Joint Stock Company



87

BFC’s fertilizer plants

Source: VIRAC


Ca Mau Petroleum Fertilizer Joint Stock Company



88


Lam Thao Fertilizers and Chemicals Joint Stock Company



89


Ha Bac Nitrogenous Fertilizer & Chemicals Joint Stock Company



90


DAP – VINACHEM Joint Stock Company



91


Quảng Bình Import Export Company



92


Southwest Petrovietnam Fertilizer and

Chemicals CorporationSoutheast Petrovietnam Fertilizer and

Chemicals Corporation

Central Petrovietnam Fertilizer and


North Petrovietnam Fertilizer and


3. Business analysis

3.1 Top 10 businesses

93







Content

94

Source: VIRAC



95

VND billionNet revenue




96




97

Source: VIRAC

VND billion

Gross profit margin, 2016 - 2017


Source: VIRAC



98

Self-financing rate, 2016 - 2017




99

Source: VIRAC

Source: VIRAC

Selling expenses, 2016 - 2017

Administrative expenses, 2016 - 2017







Content

100

Source: VIRAC



101

Fixed asset turnover, 2016 - 2017


Source: VIRAC

Day



102

Producing enterprises Trading enterprises

Days in inventory, 2016 - 2017


Source: VIRAC



103

DayDays of sales outstanding, 2016 - 2017




104

Source: VIRAC

Profit Ratio, 2016 - 2017






3.4 Target group of payment

Content

105


3.4 Target group of payment

106

Source: VIRAC

Index of payment, 2016 - 2017


4. Appendix

Content

107

108

Phu My Fertilizer

BALANCE SHEET

Unit: VND 2016 2017

A. SHORT-TERM ASSETS

I. Cash and cash equivalents

II. Short-term financial investments

III. Short-term receivables

1. Short-term receivables of customers

IV. Inventories

B. LONG-TERM ASSETS

1. Long-term receivables

2. Fixed assets

TOTAL ASSETS

A. LIABILITIES

I. Current liabilities

1. Short-term borrowings and liabilities

2. Taxes and other payables to the State budget

II. Long-term Liabilities

1. Long-term borrowings and liabilities

2. Provision for long-term payables

B. OWNER’S EQUITY

TOTAL CAPITAL RESOURCES

INCOME STATEMENT

Unit: VND 2016 2017

Net revenue from goods sold and services provided

Cost of goods sold and services provided

Gross profit of goods sold and services provided

Revenue from financing activities

Financial expenses

Interest expenses

Selling expenses

Administrative expenses

Net profit from business operations

Total accounting profit before tax

Costs of current corporate income tax

Costs of deferred corporate income tax

Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017

I. Cash Flow From Operating Activities

Depreciation of fixed assets

Unrealized foreign exchange gain (loss)

Net Cash Flow From Operations

II. Cash flow from investing activities

Expenditures on purchase and construction of fixed assets

and long-term assets

Net cash flow from investing activities

III. Cash flow from financing activities

Net cash flow from financing activities

Effect of foreign exchange differences

Net cash flow during the fiscal year

4. Appendix

Financial statements


109

4. Appendix


Binh Dien

BALANCE SHEET

Unit: VND 2016 2017






IV. Inventories

B. LONG-TERM ASSETS


2. Fixed assets

TOTAL ASSETS

A. LIABILITIES







B. OWNER’S EQUITY


INCOME STATEMENT

Unit: VND 2016 2017





Financial expenses

Interest expenses

Selling expenses






Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017














110

4. Appendix


Ca Mau Fertilizer

BALANCE SHEET

Unit: VND 2016 2017






IV. Inventories

B. LONG-TERM ASSETS


2. Fixed assets

TOTAL ASSETS

A. LIABILITIES







B. OWNER’S EQUITY


INCOME STATEMENT

Unit: VND 2016 2017





Financial expenses

Interest expenses

Selling expenses






Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017














111

4. Appendix


Lam Thao Chemicals

BALANCE SHEET

Unit: VND 2016 2017






IV. Inventories

B. LONG-TERM ASSETS


2. Fixed assets

TOTAL ASSETS

A. LIABILITIES







B. OWNER’S EQUITY


INCOME STATEMENT

Unit: VND 2016 2017





Financial expenses

Interest expenses

Selling expenses






Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017














112

4. Appendix


Ha Bac Fertilizer

BALANCE SHEET

Unit: VND 2016 2017






IV. Inventories

B. LONG-TERM ASSETS


2. Fixed assets

TOTAL ASSETS

A. LIABILITIES







B. OWNER’S EQUITY


INCOME STATEMENT

Unit: VND 2016 2017





Financial expenses

Interest expenses

Selling expenses






Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017














113

4. Appendix


Dinh Vu DAP

BALANCE SHEET

Unit: VND 2016 2017






IV. Inventories

B. LONG-TERM ASSETS


2. Fixed assets

TOTAL ASSETS

A. LIABILITIES







B. OWNER’S EQUITY


INCOME STATEMENT

Unit: VND 2016 2017





Financial expenses

Interest expenses

Selling expenses






Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017














114

4. Appendix


Quang Binh Import Export

BALANCE SHEET

Unit: VND 2016 2017






IV. Inventories

B. LONG-TERM ASSETS


2. Fixed assets

TOTAL ASSETS

A. LIABILITIES







B. OWNER’S EQUITY


INCOME STATEMENT

Unit: VND 2016 2017





Financial expenses

Interest expenses

Selling expenses






Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017














115

4. Appendix


Southwest Petroleum Chemicals

BALANCE SHEET

Unit: VND 2016 2017






IV. Inventories

B. LONG-TERM ASSETS


2. Fixed assets

TOTAL ASSETS

A. LIABILITIES







B. OWNER’S EQUITY


INCOME STATEMENT

Unit: VND 2016 2017





Financial expenses

Interest expenses

Selling expenses






Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017














116

4. Appendix


Southeast Petroleum Chemicals

BALANCE SHEET

Unit: VND 2016 2017






IV. Inventories

B. LONG-TERM ASSETS


2. Fixed assets

TOTAL ASSETS

A. LIABILITIES







B. OWNER’S EQUITY


INCOME STATEMENT

Unit: VND 2016 2017





Financial expenses

Interest expenses

Selling expenses






Profit after tax

CASH FLOW STATEMENT

Unit: VND 2016 2017














117

REPORT DISCLAIMER

This document has been prepared in good faith on the basis of information available at the date of publication without any independent verification. VIRAC has

produced this report for private circulation to professional clients only. All information and statistical data herein have been obtained from sources we believe to

be reliable and made to ensure the accuracy of the contents of the pages of the report at the time of preparation. Such information has not been independently

verified and VIRAC makes no representation or warranty, whether express or implied, of any kind with respect to the document and its contents, information and

materials. The content found in this report is proprietary to VIRAC and is provided solely for your personal and non-commercial use. You agree that you will not

use this report for any purpose that is unlawful and that you will not reproduce the report or redistribute it outside your organisation, or place it on a website for

public access without the express written permission of VIRAC.

SHOULD YOU NEED ANY ASSISTANCE, PLEASE CONTACT US:

VIETNAM INDUSTRY RESEARCH AND CONSULTANCY (VIRAC JSC.,)

6th Floor, Anh Minh Building, 36 Hoang Cau, O Cho Dua, Dong Da, Hanoi, Vietnam

Website: http://virac.com.vn/

Email: [email protected] | Tel: +84 463289520

REPORT DISCLAIMER

http://virac.com.vn/

mailto:[email protected]

Thank you !

118

vietnam fertilizer industry report q3/2018...fertilizer prices tend to rise again due to high demand...

Documents