In the context of the global economic downturn, the demand for basic chemicals from Vietnam’s “export markets” such as China and the US is expected to decline until the end of 2023.
This makes analysts less optimistic about the operation of chemical enterprises in the near future.
Yellow phosphorus is an important input material for semiconductors, while the economic downturn has led to a decrease in demand for electronics and semiconductors, and the demand for yellow phosphorus has also decreased.
World Semiconductor Trade Statistics forecasts that the global semiconductor market will shrink by 4% in 2023. On this basis, the analysis team of Vndirect Securities Company estimates, the global demand for yellow phosphorus will decrease by 15 % in 2023.
As for the price of yellow phosphorus, which has peaked since the second quarter of 2022, it is expected to fluctuate between $4,500-5,000 per tonne in 2023.
Data from the Sunsirs Commodity Exchange, as of March 8, 2023, the world gold phosphorus price is trading at 30,750 yuan/ton, down 22.3% from the peak at the end of May 2022. (39,561 yuan/ton) and continued its downtrend.
As Southern Chemical Company is expected to reduce selling price and reduce export volume of “yellow phosphorus” in 2023, it is estimated that the business results of this segment will also decrease by 25% compared to 2022.[Many chemical enterprises have increased profits in the past 7 months]
Besides the global demand for yellow phosphorus slowing down in 2023, demand for another base chemical, caustic soda, is also forecast to slow after China reopens.
The research team of Bao Viet Securities Company (BVSC) believes that China is the country with the largest caustic soda production capacity in the world and will increase the export of caustic soda after reopening.
Meanwhile, domestic production can only meet 40-50% of demand. Caustic soda products imported from China and India increasingly account for a large proportion and compete directly with domestic products.
As noted by BVSC, global caustic soda production capacity is mainly concentrated in Asia, accounting for about 62% of global production capacity; In which, China’s production capacity accounts for the largest proportion, accounting for about 44% of the total global capacity.
In 2020, China exported 1.2 million tons of caustic soda, and Vietnam is in the Top 10 countries importing this chemical from China.
Along with that, domestic caustic soda products are under competitive pressure from China due to the lack of input materials such as industrial salt, which accounts for 30% of production costs. The supply of industrial salt in Vietnam is seriously inadequate due to erratic weather and climate, so the output is unstable, salt particles are mixed with many impurities, and do not meet the standards for chemical production.
The Ministry of Agriculture and Rural Development has set a salt import quota of 80,000 tons/year from 2021 to overcome the shortage of industrial salt, while Vietnam imports an average of 400,000-600,000 tons of salt/year.
Specifically, Vietnam currently has to import industrial salt from China, India, Australia and Pakistan with about 70% of the total salt import quota.
According to BVSC’s observation, domestic chemical producers are having to import most of the industrial salt out of quota with a high tax rate of 60%.
Meanwhile, price contracts are usually signed 3 months in advance, so the net profit of chemical enterprises is forecasted to be negatively affected and go backward in 2023, especially in price competition with cheap Chinese products. The country is getting bigger.
Along with that, the possibility of higher electricity costs in 2023 also poses challenges for chemical enterprises when electricity costs account for 20-30% of the total cost of production of basic chemicals.
Vndirect analyst Nguyen Duc Hao said that Vietnam’s electricity industry will record a rapid growth in electricity consumption in the period 2022-2030 after GDP growth is expected to be high in this period.
According to the high load scenario in the draft Power Master Plan VIII, electricity demand will increase with a high compound growth rate forecasted at 9.2% in 2023-2030.
With this thesis, Vndirect believes that the gross profit margin of chemical enterprises will decrease in 2023 due to increasing cost of electricity and lower average selling price.
However, in the long term, the chemical business still has a growth factor thanks to its own story. Like Duc Giang Chemical Group, the completion of phase 1 of the Chlor-alkali-vinyl (CAV) project in 2024 will become the main revenue growth driver, contributing 25% of annual revenue.
PetroVietnam Fertilizer and Chemical Corporation (PVFCCo, stock code DPM) also said that PVFCCo has just exported 19,000 tons of Phu My urea to Indonesia. In recent years, PVFCCo has focused on developing export markets with a high annual volume.
PVFCCo’s fertilizer products have been recognized on the international fertilizer business map with large and demanding markets such as India, Australia, Korea, Japan, Thailand, Taiwan (China), Philippines. …In 2022 alone, PVFCCo’s export output of urea nitrogen is estimated at over 190,000 tons, the highest since