Vinachem restructure to cut fertilizer holdings

Release time：2018-01-15

Vinachem restructure to cut fertilizer holdings Vietnam's government has approved a restructuring scheme for state-owned chemical and fertilizer producer Vinachem Group that will cut its holdings to boost overall competitiveness. Vinachem will sell stakes in certain fertilizers producers, while reducing its interests in others as part of the scheme that runs through to 2020. The country's largest fertilizer manufacturer intends to sell its entire interest in urea producers Ha Bac Nitrogenous Fertilizer and Chemical and Ninh Binh Nitrogenous Fertilizer, once they are running proftably. It will do the same for its No.1 and No.2 DAP production units in Dinh Vu and Lao Cai. It currently has between a 50-100pc stake in each of these companies. It will cap its shareholding to less than 50pc in NPK/ phosphate producers Can Tho, Southern Fertilizers and Binh Dien. It currently has over 50pc in each. Vinachem will limit its investment to between 50-65pc in NPK/phosphate producers Lam Thao, Van Dien Fused Magnesium Phosphates and Ninh Binh Phosphate Fertilizer. It currently holds over 50pc in each of these companies. It will withdraw its entire capital from phosphate and NPK producer Duc Giang Chemical and Detergent, for which it currently has as shareholding below 50pc. It will end its interest in Ninh Binh Fertilizer Port. Vinachem will also adjust its interests in several other companies not in the fertilizer sector. Vinachem was not available for comment and clarifcation. The move is part of wider Vietnam governmental reforms of the economy, which has reviewed underperforming companies and senior management put under greater scrutiny. There is expected to be limited short-term impact on Vietnam's fertilizer market as the companies likely to be sold early on in the process do not currently have a major influence on the overall sector. But the restructure and divestments could see some local producers close in the longer term, affecting the supply-demand dynamic. Vietnam is currently a net importer of fertilizers bringing in regular quantities of DAP, urea, NPKs and other products. China environment tax to be enforced in April China has introduced a new Environment Protection Tax Law, effective from 1 January 2018, under which a new environment tax will be applied on various businesses from April onwards. China will begin levying tax on businesses and public institutions that discharge pollutants in April, according to state-owned news agency China Daily. The plan will look to improve environmental conditions in the country by replacing the ‘pollution discharge fee’ model with a new environment tax plan. But a lack of details and oversight on what this could entail has confused market participants in China, softening its impact on the fertilizer industry in the country. As a result, fertilizer factories are continuing to produce as normal. Initial outlines of the tax rates range from Yn1.2 ($0.18) to Yn12 ($1.84) per unit of atmospheric pollution, Yn1.4 ($0.22) to Yn14 ($2.15) per unit of water pollution, Yn5/t ($0.77) of coal waste and Yn1,000/t ($153.7/t) of “hazardous waste”, according to China Daily. Some factories that are not equipped with facilities that help curb emissions are likely to pay more tax, whilst smaller producers could struggle fnancially under the new model. But output from larger fertilizer producers with high sales volumes and production capacity is unlikely to be affected, along with product prices. At present, dialogue between local governments and production facilities is occurring to establish what tax range will apply to them. But this process will likely take time, and as a result the majority of market participants are ‘yet to take it seriously’, according to one market participant. Others suggest that the new tax plan will hardly vary from the previous model, which was believed to allow some local governments to ‘exploit loopholes and exempt enterprises that are contributors to revenue’, according to state-owned news agency Xinhua.