Chemicals

Market Overview

Vietnam has a history of heavy industry, but competitiveness has been poor due to obsolescent technology and infrastructure. The annual import market for chemicals is approximately US$ 200 million, mainly lower-quality products from producers and traders in Singapore, Korea and China; these are used as feedstock and for other industrial uses.

Domestic production is increasing, with some foreign investment. Throughout the 1990s, annual growth rates were recorded at around 20%, although the sector remains modest by comparison to neighbouring countries. Vietnamese chemical manufacturers produce a limited range of products, and in many sectors (organic, synthetic and oil products) are unable to compete with much cheaper imports. Tariffs remain high, although will be affected in the next decade by Vietnam's commitments under the ASEAN FTA.

Opportunities

As Vietnam develops domestic production, opportunities will arise in equipment and services supply. A five year master plan has been approved for the chemical industry, with estimated investment of US$ 2 billion, including targets for production of urea, NPK, DAP and phosphate. State-owned Vinachem has been allocated US$ 1 billion to execute a major part of the plan with new plants and upgraded facilities to produce new petrochemicals for the plastics and textile industries. Remaining investment will be from private or foreign sources.

Some major projects offering opportunities to Canadian suppliers include subcontracting for the first oil refinery plant in the central province Quang Ngai; a second oil refinery has recently been approved; the US$ 492 million fertilizer plant in a gas-power-fertilizer complex at Ca Mau and US $ 445 million Phu My urea plant in Vung Tau. Shortages in domestic fertilizer production, particularly commodities such as urea and potash, have presented good opportunities for Canadian fertilizer exporters. Canadian companies have also supplier specialty chemicals to other emerging sectors, such as steel.

Market Access Considerations

Foreign-invested producers tend to import machines and equipment from their countries of origin. Procurement by state-owned companies of more than US$ 130,000 require tendering, but the process is far from transparent; success is only realistically possible through strong local connections, which can be built through a local representative.

Again, tariffs are high and this is a price-sensitive market. Exporters should consider financial ability of local importers, many state-owned, which could result in payment issues.

Competition

Major exporters of machinery and equipment to Vietnam are Japan, Korea, Taiwan, Germany. Industrial petrochemicals are supplied to a large extent by refineries in US, Singapore and the Middle East. Domestic producers-especially foreign invested-are also major competitors. Germany, Korea and Japan are major suppliers of tanning chemicals.

  Local Chemical Production to Reduce Imports

The Industry Ministry will focus on the production of 11 principle chemicals to facilitate agriculture and rural development by supplying them with fertilisers, insecticides, pesticides, detergents, rubber products, batteries, industrial gas and pharmaceuticals.

According to the programme on the ‘development of the chemical industry by 2010 for the industrialisation and modernisation of agriculture and rural areas,’ recently approved by the Industry Ministry, four new factories will be built by 2010. They new plants include: the Ca Mau urea-gas plant with an output of 800,000 tonnes of urea year; a plant in the North producing urea from coal dust with an output of 560,000 tonnes of a year; the Diamino phosphate (DAP) plant in Dinh Vu, Haiphong with a capacity of 330,000 tonnes/year; and an amone sulphate (SA) plant with a capacity of 100,000 tonnes/year.

The phosphate fertiliser sector will also expand the capacity of Lam Thao plant to 850,000 tonnes a year, Long Thanh plant to 200,000 tonnes/year and other plants to 500,000 tonnes/year.

New kinds of fertilisers will also be developed (e.g. leaf nutrients) and particular chemicals of advanced technology for food preservation, post-harvest maintenance and aquaculture will be produced in order to substitute imports.

Concerning detergents, the chemical industry will modernise its production lines before 2010 to meet the demand of the rural population at a reasonable price.