CRU: Vinachem Announces the Divestment of its DAP and Urea Production Assets

LONDON, February 7, 2018 /PRNewswire/ --

The Vietnam National Chemical Group (Vinachem) has announced that it plans to sell its entire equity stake in 15 subsidiary companies, including all four of its DAP and urea production assets.

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Strong demand growth is expected for both the phosphate and nitrogen fertilizer markets in Vietnam, which is likely to elicit considerable interest in the Vinachem assets. Potential investors will be seeking answers to the key questions: How competitive are these assets relative to other domestic and international producers? What are the main factors that will determine their competitiveness going forward? What are the key risks surrounding these potential investments?

Growth in Vietnamese DAP and urea demand will continue to be driven by expanding rice production
Over the last few years, we have seen an extraordinary expansion in the size of the DAP market in South East Asia. Demand growth since 2010 has been the greatest of any region in the world, totalling over 1 million tonnes product. This trend is set to continue over the next five years, with projected demand growth in the region second only to South Asia, where Indian demand is recovering following policy changes earlier in the decade.

It is Vietnam that has been - and will continue to be - the driving force behind the rapid increase in South East Asian DAP demand. Vietnam is the largest DAP consumer in the region (with over 1.4 million tonnes in 2017), and is forecast to account for over half of regional growth to 2022.

Vietnam is also a significant consumer of nitrogen fertilizer, representing the 2nd largest urea market in South East Asia, and the 9th largest in the world, with nearly 2.7 million tonnes in 2017. Of the major urea-consuming countries globally, only Pakistan is expected to see faster demand growth than Vietnam over the next five years.

Why are we seeing such a rapid expansion in DAP and urea consumption in Vietnam? The answer lies in the continued growth in the country's rice production, which in 2017 surpassed 44 million tonnes, and which now accounts for 60% of domestic phosphate and nitrogen fertilizer demand. Sustained increases in harvested land area, and rising fertilizer application rates in domestic rice fields, have helped Vietnam become the 5th largest producer of the crop globally, and the 3rd largest exporter.

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SOURCE CRU