Duc Giang Chemical Group turmoil puts spotlight on apatite resource allocation and beneficiaries in Vietnam

The arrest of senior executives at Duc Giang Chemical Group (DGC) over alleged illegal apatite mining has reignited debate over how Vietnam allocates strategic mineral resources, with stark differences in how companies benefit from the same raw material.

Apatite, a key input for fertilizer production, has long been described as a “cash cow” sustaining multiple businesses across both state-owned and private sectors, albeit with varying levels of profitability.

At the center of the supply chain is Vietnam Apatite Company Limited (VAPC), a unit of state-owned chemical group Vinachem, which manages and exploits apatite mines in Lao Cai province. The company has maintained annual revenue of around VND3.5-4 trillion ($152.15 million) in recent years.

While VAPC does not disclose detailed customer data, financial statements from downstream companies provide insight into major consumers.

Fertilizer firms account for half of demand

The most identifiable customers are phosphate-based fertilizer producers within the Vinachem system.

In 2025, DAP Vinachem (DDV) purchased apatite worth about VND574 billion ($21.83 million), while Lam Thao Superphosphate and Chemicals consumed around VND552 billion ($21 million).

Among fused phosphate producers, Van Dien Fused Magnesium Phosphate (VAF) recorded purchases of VND191 billion ($7.27 million), and Ninh Binh Phosphate Fertilizer about VND179 billion.

Although DAP No. 2 - Vinachem Joint Stock Company does not publish specific financial reports, based on information that approximately over 200,000 tons of DAP was produced and consumed in 2025, it can be predicted that the value of apatite ore purchases by DAP 2 was around VND500 billion ($19.02 million), slightly lower than its "sibling" DDV.

Combined, fertilizer companies under Vinachem consume roughly VND2 trillion ($76.07 million) worth of apatite annually, equivalent to about 50% of VAPC’s revenue. Allocation appears relatively even, with no single company dominating supply.

This reflects Vinachem’s coordinating role, prioritizing stabilization of fertiliser production rather than maximization of economic returns.

High-value users emerge outside state sector

The remaining portion of apatite consumption, estimated at another VND2 trillion (($76.07 million), is attributed to deep-processing chemical producers, exporters and industrial users.

Among them, DGC stands out as a key player. Unlike fertilizer firms that depend entirely on VAPC or imports, DGC has partial control over its own apatite resources.

The company holds mining rights valued at about VND315 billion ($11.98 million) within its intangible assets, mainly tied to deposits at two mining sites with estimated reserves of around 9 million tons. However, these mines are currently suspended pending regulatory and environmental approvals.

Even with existing rights, DGC is estimated to still source about 20% of its apatite needs externally.

Through subsidiaries in Lao Cai, including phosphorous production units, DGC plays a central role in producing yellow phosphorus (P4) and downstream chemicals, positioning itself as a key participant in the higher-value segment of the apatite value chain.

Profit gap highlights value chain imbalance

Financial data highlights a significant disparity in profitability across the value chain.

In 2025, DGC reported revenue of more than VND11 trillion ($418.4 million) and net profit of nearly VND3.19 trillion ($121.26 million), implying a net margin of around 29%. Similarly, a pure P4 producer recorded margins of about 18%.

In contrast, fertilizer producers such as LAS, DDV and NFC typically operate with net margins of 5-10%.

At the group level, Vinachem generated revenue of about VND33 trillion ($1.26 billion) in the first half of 2025 - nearly three times that of DGC - but reported net profit of only more than VND2.13 trillion ($81.17 million), indicating significantly lower efficiency.

The gap suggests that deeper chemical processing generates substantially higher value from the same apatite resource compared with traditional fertilizer production. In other words, although not the largest consumers, deep-processing businesses like DGC are the ones who benefit more from apatite.

Policy priorities shape resource allocation

Despite lower profitability, fertilizer production remains strategically important for ensuring food security, explaining why a large share of apatite is directed toward this segment.

Meanwhile, Lao Cai’s apatite reserves — among the largest in Southeast Asia — are showing signs of declining quality and depletion. VAPC has indicated that current reserves may not fully meet demand from Vinachem units through 2030 and beyond.

Fertilizer producers have also reported declining ore quality, leading to rising costs and shrinking margins.

These trends are prompting calls for more efficient resource allocation, with a gradual shift toward higher-value processing seen as inevitable.

However, recent legal issues involving DGC - including environmental violations and alleged off-plan mining - may lead regulators to adopt a more cautious approach in allocating mining rights.

With policy still prioritizing fertilizer production, balancing economic efficiency with national strategic goals is expected to remain a key challenge for the sector.

Single superphosphate: policy-driven production

Single superphosphate (SSP), a low-margin fertilizer with relatively low nutrient content, continues to be produced despite limited profitability.

Its role in supporting domestic agriculture - particularly for acidic soils - and ensuring affordable access for farmers makes it a policy-driven product.

Maintaining SSP production is therefore seen as essential to stabilizing fertilizer supply and supporting food security, even as higher-value applications of apatite gain prominence.