Vietnam's imports of various fertilizers are expected to slow in the third quarter, as strong arrivals in the first half of the year and slower domestic sales could weigh on import demand.
Vietnam implemented a value-added tax (VAT) of 5pc on all fertilizers from 1 July. The VAT is aimed at levelling the playing field between local and imported fertilizer products and lowering input costs for domestic producers. This has pushed importers to speed up purchases in the second quarter of this year, asking for cargoes to arrive before 1 July so that they will not incur VAT costs.
Importers have also increased their purchases of DAP and urea in small bags of under 10kg from China, which were more competitively priced and more readily available than that of Chinese bulk cargoes.
Meanwhile, local retailers and farmers find small bags of fertilizers more appealing due to their lower prices and ease in transporting from warehouse to field. This has contributed to higher demand for small bags of DAP and urea in the recent weeks.
Vietnam's DAP imports from January to the first half of July rose to 291,800t, from 283,300t during the same period last year, the latest customs data show. Its urea imports in the same period also firmed to 220,400t, from 193,700t a year earlier. Vietnam's MOP imports climbed to 765,500t, from 659,100t a year earlier. Amsul imports also rose to 765,500t, from 659,100t a year earlier.
Importers are now seeing a slowdown in domestic demand as the main application season winds down in early August. Farmers are expected to return to the market only in October. The current high inventories in DAP, urea and MOP, slower domestic offtake and the halt in China's exports of small bags of fertilizers will drive importers to slow down their purchases in the third quarter.
By Huijun Yao
