Speculation mounts over Duc Giang Chemical’s potential acquisition strategy

Rumors of strategic moves by Duc Giang Chemical Group hint at a significant expansion through mergers and acquisitions (M&A). A potential target could be Vietnam Apatite Phosphorus, which could bolster Duc Giang Chemical’s position in the yellow phosphorus market.

Duc Giang Chemical, which is already a major player in Vietnam’s chemical sector, has openly expressed its ambition to increase its yellow phosphorus production capacity. The company’s sights are set on integrating Vietnam Apatite Phosphorus into its portfolio within the year. A strategic alignment is evident as Duc Giang Chemicals already exercises control over Vietnam Apatite Phosphorus through its subsidiary Duc Giang Lao Cai Chemical Company Limited, which holds a 51% stake.

Vietnam Apatite Phosphorus operates a yellow phosphorus plant with a capacity of 20,000 tonnes per year, dwarfed by Duc Giang Chemical’s substantial 70,000 tonnes per year production through its subsidiaries. The potential acquisition is seen as a crucial step for Duc Giang Chemical to consolidate its dominance in the market, especially since the government has ceased the issuance of new licenses for yellow phosphorus factories.

The financial health of Vietnam Apatite Phosphorus, with a net revenue of 1,700 billion Vietnamese dong ($68.6mn) and a net profit of 286 billion Vietnamese dong ($11.54mn) for 2023, albeit a decline from the previous year, still represents a significant addition to Duc Giang Chemical’s portfolio. This acquisition is not just about expanding capacity; it aligns with Duc Giang Chemical’s broader strategy to streamline operations and expand downstream activities for added value, leveraging internal yellow phosphorus supplies and reducing reliance on raw exports.

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Moreover, Duc Giang Chemical is in the process of extending its mining license, anticipating greater reserves than initially estimated. This move underscores the company’s commitment to securing a stable and expanded supply of raw materials for its production lines.

The backdrop of fluctuating yellow phosphorus prices, driven by global industrial dynamics, adds another layer of intrigue to this potential acquisition. With prices under pressure in 2023 but expected to rise in 2024, Duc Giang Chemical’s strategic positioning could not be more timely. The company’s facilities are currently operating at full capacity, with forecasts suggesting a bright future in terms of profitability, especially with the anticipated recovery in the semiconductor industry and ongoing production of high-margin downstream products.