Despite a global decreasing prices, the domestic fertiliser market is heating up due to a shortage in supply sources, according to industry insiders.

Accordingly, a 50-kg bag of urea fertiliser in southern provinces currently stands at VND570,000-575,000 (US$27.14-27.38), up roughly VND70,000-80,000 against early this year. In several northern and central provinces, the price is even higher, reaching VND590,000-600,000 per bag. The rise is estimated to increase by nearly 40 per cent compared with the same period last year.

This is in direct contrast to a price decline in the global market where a tonne of fertiliser is at US$460-465, down $40-100 against May. With the import price, in addition to transport and other costs, it is estimated that a 50kg-bag of fertiliser should be sold at roughly VND500,000.

Cao Hoai Duong, general director of the PetroVietnam Chemicals Co, attributed the local price skyrocketing to the shortage of fertiliser supply in the domestic market due to an inaccurate forecast.

Earlier this year, fertiliser industry experts anticipated that the country would not have to import urea fertiliser in 2012 in the wake of the operation of two new plants of Ca Mau and Ninh Binh due in the first quarter. As a result, domestic businesses did not import urea fertiliser this year. Unfortunately, the plants could not be put into operation as scheduled due to technical problems.

According to statistics from the General Department of Customs, the country imported only roughly 110,000 tonnes of fertiliser in the first five months of the year compared with 1.3 million tonnes of the same period last year.

Currently, domestic importers do not want to import fertiliser either, as they are afraid of suffering a high inventory again as last year. In the last quarter of last year, domestic businesses imported a large amount of fertiliser as it was forecast the product's demand in the domestic market would surge sharply. However, they were then burdened with a high inventory as demand was lower than anticipated.

To solve the fertiliser shortage in the domestic market, PetroVietnam Chemicals Co, which supplies roughly 40 per cent of the country's total fertiliser demand, said it would run all of its capacity to meet local demand. The company this month will produce roughly 130,000 tonnes of urea fertiliser. It is also organising programmes to sell fertiliser directly to farmers to avoid unreasonable price hikes.

The industry insider expected the fertiliser market to stabilise in the third quarter when Ninh Binh and Ca Mau fertiliser plants officially come into operation after several months under trial. The two plants will supply the domestic market with a total 1.36 million tonnes of urea fertiliser yearly.

Source: VNS