A worker operating equipment inside a Duc Giang Chemical plant in Hung Yen province. (Photo: ducgiangchem.vn) After achieving impressive results in 2022, chemical exports showed signs ofslowing down in the first two and a half months of 2023. The export turnover ofbasic chemicals only reached 930 million USD, down 10.9% year-on-year, due toweak global demand. Chemical export value ranks 12th in total export items of Vietnam.
VNDirect forecasts that demand from Vietnam's chemical export markets such asChina and the United States will decline further until the end of 2023 due tohigh inflation expectations and economic recession risks.
For yellow phosphorus, the economic downturn has led to a decline in demand forelectronics and semiconductors in 2023. World Semiconductor Trade Statisticsforecasts the global semiconductor market will shrink by 4% in 2023 to 557billion USD, the first annual decline since 2019.
Taiwanese chipmaker TSMC, the world's largest contract chipmaker, forecaststhat first-quarter revenue will fall 5% year-on-year.
VNDirect believes that the demand for yellow phosphorus - an input material forsemiconductor production will decrease in 2023. Experts forecast that the priceof yellow phosphorus will reach 4,500-5,000 USD in 2023 due to weak demand.
For caustic soda, the domestic price of caustic soda is highly dependent onChina, as China exports about 40% of Vietnam's caustic soda needs. The price ofcaustic soda in China has declined 27% since December 2022 as the caustic sodafactory in China returns to operation in 2023 and aluminium demand is weak.Furthermore, reopening China's economy will improve the supply of caustic sodain Vietnam.
VNDirect forecasts that the price of caustic soda will reach about 700-800 USD pertonne in 2023, down 15% year-on-year. Because price contracts are usually signedthree months in advance, VNDirect believes that the net profit of caustic sodacompanies such as the South Basic Chemicals JSC (CSV) and Viet Tri Chemical JSC(HVT) in the first half of 2023 will decrease compared to the second half of2022.
The cost of electricity accounts for 20-30% of the total cost of producingbasic chemicals. Experts see that Vietnam's electricity industry will recordrapid growth in electricity consumption in 2022 - 2030.
According to Vietnam’s draft Power Master Plan VIII, electricity demand willincrease with a high compound growth rate forecast at 9.2% in 2023-2030.VNDirect believes that the gross profit margin of businesses in the chemicalindustry will decline in 2023 due to rising electricity costs and lower averageselling prices.
"In general, we forecast that the gross profit margin of basic chemicalbusinesses will decrease by 4-6 percentage points year-on-year in 2023,"said VNDirect.
During the 2023 General Meeting of Shareholders held on March 29, the Duc GiangChemical Group (DGC) approved a business plan with a consolidated revenuetarget of 10.87 trillion VND in 2023, of which that from yellow phosphorus, themain product of the company, would reach 4.6 trillion VND. Profit after tax isestimated at 3 trillion VND. Thus, these targets decrease by 24.5% and 50%respectively compared to 2022, the year of high record profit of DGC since itsestablishment.
However, VNDirect still favours DGC stock as it is Asia's largest exporter ofyellow phosphorus and VNDirect expects that DGC's net profit will rebound in2024 thanks to recovering demand for other electromagnetic goods./.
VNA
