A multi-layered distribution system, high production and transport costs, and an artificial supply shortage have fuelled domestic fertiliser and steel prices despite the -autumn crop. The price started increasing by VND1,000-3,000 a kilo since late last year.
For example, in the Cuu Long (Mekong) Delta region, urea fertiliser rose by VND1,300 to VND9,800 a kilo while diammonium phosphate (DAP) went up by VND2,000 to VND15,000 a kilo, potassium by VND2,200 to VND12,200 a kilo, and NPK by VND2,000 to VND11,000 a kilo.
Nguyen Anh Tuan, deputy director of the Finance Ministry’s Pricing Management Department, said the State had offered support policies to stabilise fertiliser prices, including the zero per cent import tax and incentive input prices for locally made fertilisers.
However, problems still exist in the management and implementation of price stabilisation measures. In addition, there is a weak supply-demand regulation system because of poor and inconsistent information.
Tuan said the fertiliser association has not paid enough attention to having an adequate level of fertiliser storage, which has pushed prices up as demand ran high.
Soaring fertiliser prices have also occurred because of speculation, the overlapping distribution network, and monopolies existing in the market, he added.
Nguyen Loc An, deputy head of the Industry and Trade Ministry’s Domestic Market Department, said the increase in fertiliser prices resulted from heavy reliance on the import market.
He said the country would need 8.5 million tonnes of fertiliser this year, but the local market could only produce 5.9 million tonnes.
He said the local market has had to import 100 per cent or 1.3 million tonnes of potassium and South Africa (SA) fertiliser, 50 per cent or 990,000 tonnes of urea, 40 per cent or 260,000 tonnes of DAP.
He added that volatile fertiliser prices were also due to the supply-demand imbalance and an uncertain supply.
Steel price storm
While global steel prices are undergoing a lull and currently falling, domestic steel prices are much higher than imported ones, which has helped the latter to penetrate the local market.
Deformed steel prices in North America declined by US$50 over last month to $680-700 a tonne while steel prices in Turkey are currently $30 lower than last month’s price.
Transactions have also slowed down on the Asian steel market, with steel ingot prices sometimes selling for $640 a tonne.
Steel prices at domestic mills, however, sit at VND18 million (US$900) a tonne inclusive of taxes, VND4 million ($200) a tonne more expensive than global steel prices and in some countries in the region.
The sharp difference in steel prices has lowered the market share of the domestic rolled steel segment to 14 per cent from 30 per cent earlier. Imported rolled steel is VND400,000 ($20) a tonne cheaper than the local counterpart.
A senior official of a large steel mill in HCM City said that exceedingly high production and service expenses were attributable to high steel prices on the domestic market.
He said the porterage fee on the domestic market was two to three times higher than other countries and discount costs remained high at domestic factories.
Nguyen Tien Nghi, deputy chairman of the Viet Nam Steel Association, said the demand for construction steel was plunging, with March steel consumption falling to 327,000 tonnes from 475,000 tonnes in February.
An estimated 300,000 tonnes of steel were consumed in April.
But local steel factories were planning price hikes to offset higher expenses and bank loans, he said.
Do Duy Thai, general director of Thep Viet Steel Co, said steel prices would most likely go up in the near future because of rising electricity prices