Vietnam Experiencing Strong Rise in Demand for Paper Products

 

According to a report this past week by VietNamNet Bridge, Hanoi, Vietnam, SCG’s (Bangkok, Thailand) Q1 finance report showed that Vina Kraft (VKPC), a joint venture between Siam Kraft Industry, a subsidiary of SCG, and the Rengo Co. (Osaka, Japan), plan to spend VND 2.75 trillion to increase its production capacity by twofold from the current 243,500 metric tpy. Siam Kraft Industry holds 70% of capital in the joint venture.

Kan Trakulhoon, president and CEO of SCG, said the expansion aims to increase the production capacity to satisfy increasingly high market demand in Vietnam. The majority of this rising demand has so far been fed by imports.

With total investment capital of VND 6.1 trillion, SCG believes VKPC would become the largest paper packaging manufacturer with 90% of its output to be consumed in Vietnam.

Prior to that, in March 2015, Lee & Man Vietnam, a subsidiary of Lee & Man Paper (Hong Kong, China), started construction of what will be a $1.2 billion investment in the pulp and paper plant in Phu Huu A Industrial Park in the country’s Hau Giang province.

The plant is expected to become operational in the first phase of the project, capitalized at $350 million, by the end of the year, to churn out 600,000 metric tpy.

Meanwhile, Nine Dragons Paper, the Hong Kong based paper manufacturer holding a 60% stake in Cheng Yang Co., also located in the city, announced its plan to relocate machines and equipment from China to Vietnam to help Cheng Yang Vietnam raise capacity from 100,000 metric tpy to 500,000 metric tpy.

Cao Tien Vi, general director of the Sai Gon Paper JSC, a 100% Vietnamese owned company, noted that the VKPC production expansion is foreseeable because the manufacturer has completed the first phase of the project and it has been running at full capacity for the past two years.

Vi said when Vietnam joins the ASEAN Economic Community and integrates more deeply into the world, it will receive more and more paper manufacturers from different countries and territories.

However, Vi, the owner of the paper manufacturing company that currently holds 10% of the nation’s market share, is not worried about SCG’s expansion. He thinks the expansion is good news, because this would allow Vietnamese companies to reduce imports of alternate materials. 

A report from Vietnam’s Rong Securities Co. shows that there is not much competition in the paper packaging industry. Furthermore, domestic production can only satisfy 76% of domestic demand, which means that the market is still large enough for more manufacturers.

While foreign invested enterprises focus more on making high-end products, Vietnamese traditionally target the lower-cost market segment.