Chemical enterprises are top-earning

Favorable weather facilitates crops, thereby improving fertilizer demand. Photo: ST

Buoyancy from the beginning of the year

In 2020 and early 2021, although the world and domestic economies suffered negative impacts from the Covid-19 pandemic, chemical enterprises still achieved positive results.

According to the Department of Chemicals (Ministry of Industry and Trade), the total annual output of Vietnam's chemical industry accounts for about 10-11% of the total industry GDP, its labor force accounts for nearly 10% and has high labor productivity of 1.36 times the average labor productivity of the whole industry thanks to high automation.

After ongoing projects are completed and operated stably, the total output value of the chemical industry will account for 13-14% of the whole industry.

As of 2020, the whole industry had about 1,818 enterprises distributed in six regions of the country, of which 894 units produce fertilizers (accounting for 49%), 106 units produce plant protection chemicals (accounting for 6%), 14 units producing petrochemical products (accounting for 1%), and 68 units producing basic chemicals (accounting for about 4%).

Additionally, many of Vietnam’s large enterprises and corporations have been interested in investing in the chemical industry.

Duc Giang Chemical JSC recorded net revenue of more than VND1,949 billion in the first quarter of 2021, up 28%.

According to this company, the innovation in production technology of yellow phosphorus, extracted phosphoric acid, and fertilizer has helped them reduce electricity costs and input material costs (such as apatite ore and coal), leading to a reduction in product costs, and an increase in gross profit by 41% over the same period. As a result, the company earned VND284 billion in net profit in the first quarter, an increase of 50% compared to the same period last year.

At Loc Troi Group, the first quarter's revenue was 3.3 times higher than the same period last year with nearly VND2,400 billion. In which, the plant protection chemical segment had sales growth of 375%, reaching VND1,548 billion, contributing nearly 65% of the revenue. It is thanks to favorable weather and high prices of agricultural products that prompts farmers to actively invest in production.

In particular, many fertilizer firms recorded positive results, despite the sharp increase in world’s oil prices since the beginning of the year.

PetroVietnam Fertilizer and Chemicals Corporation - JSC (PVFCCo - Phu My Fertilizer) achieved net revenue of VND2,004 billion and gross profit of VND375 billion in the first quarter of 2021, both up 28% over the same period last year. The leader of Phu My Fertilizer said the sales volume and average selling price of chemical fertilizers have both increased, which has helped the company reduce the negative impact from the cost of raw materials for fertilizer production to general profit margin. Additionally, the company strictly reduces sales and administration costs, thereby increasing business efficiency and competitive selling prices while ensuring profit margins.

At PetroVietnam Ca Mau Fertilizer JSC (Ca Mau Fertilizer), the domestic and international consumption of the main product urea in the first quarter of 2021 reached 216,000 tons, up 21% over the same period last year. In particular, this company also exported two plots of urea to Bangladesh with an output of 45,000 tons.

Advantage from seasonal demand

Talking about the advantages and difficulties for the company’s development in the future, Van Tien Thanh, member of the Board of Directors and General Director of Ca Mau Fertilizer, mentioned some advantages, such as: urea price in 2021 could reach about US$253 per ton according to the Fetercon's forecast; the weather was more favorable for the crop, thereby improving fertilizer demand. Moreover, the company’s inventory at the end of 2020 was low, helping this firm be proactive in product distribution in 2021.

Many analytical reports of individuals and organizations forecast that the market for the chemical field was promising. For example, in the fertilizer sector, the report of BSC Securities Company showed that fertilizer enterprises would continue to benefit from the positive growth in fertilizer demand in 2021, thereby partially offsetting the negative impact from increased raw material prices. Moreover, many enterprises are expecting that the National Assembly will pass the revised VAT Law this year. As a result, nitrogen gas firms are expected to benefit the most from this change, with around VND300 billion of VAT will be refunded.

However, the leader of Ca Mau Fertilizer mentioned some difficulties, including: the world oil price is on the rise, at about US$60 per barrel in 2021, leading to an increase in gas prices; negative impacts from the Covid-19 pandemic; large domestic oversupply leads to fierce competition between both domestic and export producers; the local currencies of countries such as Malaysia, Indonesia, and China depreciate, creating a competitive advantage in exports for these countries.

In a recent meeting, Nguyen Van Thanh, Director of the Chemical Department (Ministry of Industry and Trade), said enterprises had limited economic potential, leading to small and scattered investments and lack of technology, while the chemical industry requires a very large investment scale, high technology, and strict regulations. Furthermore, due to inadequate awareness, many localities do not attract investment in the chemical industry due to concerns about environmental risks.

Thus, the Department of Chemicals is developing a strategy to grow Vietnam's chemical industry. Thanks to this strategy, businesses will have adequate information about industry development, as well as point out difficulties and obstacles to add appropriate solutions in the process of chemical industry management and development.