How many tonnes of coal does your company consume in a year to produce fertiliser?

To produce fertiliser, VINACHEM needs about 340,000 tonnes of coal and 300,000 tonnes of coal dust annually. At present the price is VND737,000/tonne ( US$46) for coal and VND379,000($23) for coal dust respectively.

VINACHEM is very proud to say that we have satisfied the market’s demand for nitrogenous fertiliser, about 70% of the NPK and 8% of the fertiliser for agricultural production.

With this effort we have contributed to stabilising the country’s fertiliser prices.

Do you think the increase in the price of coal will seriously affect the price of fertiliser?

The cost of coal accounts for 60% of the price of nitrogenous fertiliser and 26% of the price of phosphate fertiliser. So, there is no doubt VINACOMIN’s decision will seriously affect the production of nitrogenous fertiliser in 2008. In other words, it would cost VINACHEM another VND135bil ($8.4mil) to produce the same volume of fertiliser as in 2007.

The increase of production costs will reduce the profit of production units. I hope that even with the Government’s decision to let the world market, particularly oil prices, determine commodity prices, the enterprise might still make some profits.

In 2008, the Van Dien Nitrogenous Fertiliser company set its target profit at VND22bil ($1.3mil) before tax and the Ninh Binh Fertiliser company set theirs at VND15bil ($937,500). So the VND67bil ($4.1mil) increase in the price of coal will undoubtedly make these two companies operate at a loss if they keep their selling prices for nitrogenous fertiliser at 2007 levels.

It is estimated the demand for nitrogenous fertiliser for Winter-Spring 2008 will be about 247,000 tonnes per month.

Given current conditions, VINACHEM is entirely capable of meeting these demands, but the price for each tonne must increase by VND150,000-160,000/tonne, or about 12 per cent against the current price, in order to maintain production levels.

We plan to apply the new price in early 2008 too.

The price of fertiliser is not in the list of goods controlled by the government, is that right?

That’s correct – the price is decided by the production companies.

In business, profits are a matter of life and death. Following VINACOMIN’s decision to increase the price of coal by at least 46 per cent, why shouldn’t the nitrogenous fertiliser companies also increase their products’ price to maintain production and to pay the workers’ salaries? However, with a country of which some 70% of its population lives on agriculture, most of them poor and vulnerable to natural disasters and epidemics, the increase in fertiliser’s price could be described as "a shock" to them. We need to think about this thoroughly, particularly when Vietnam is honouring its WTO committment to eliminate agricultural subsidies.

Will VINACHEM take any measures to stabilise the price of fertiliser in the Winter-Spring of 2008?

We plan to have a meeting with VINACOMIN sometime this week to discuss a plan to gradually increase the price of coal in hopes of preventing a shock to farmers.

We support VINACOMIN’s decision to increase the coal price, but would prefer that they postpone the increase until April, instead of January, 2008.

VINACHEM will submit a report to the Government expressing our support to VINACOMIN’s decision.

However, VINACHEM will ask the government to consider its proposal to ask the Viet Nam Railway Union to increase its transportation capacity so that the transportation time from the factories to the farmers will be shorter.

Source: Viet Nam News.