What factors will help packaging paper businesses grow?

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What factors will help packaging paper businesses grow?

In 2021, packaging paper production enterprises were assessed to have many favorable factors for growth thanks to the high increase in domestic and world demand for paper.

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Paper production line at the second Vina Kraft paper factory in Binh Duong

According to SSI Securities Joint Stock Company (SSI), paper packaging consumption in Vietnam is expected to increase by 12% in 2021-2025, thanks to the continuing urbanization rate. SSI forecasts that the urbanization rate in the country is estimated at 40% in 2024 compared to 37% in 2019. The paper packaging segment also benefits from the rapid growth of Vietnam’s e-commerce.

According to the Department of E-commerce and Digital Economy, Vietnam’s e-commerce will grow impressively in 2020 with an increase of 18%; the market size is 11.8 billion USD, estimated to account for 5.5% of the total revenue. Retail sales of goods and service revenue nationwide. Vietnam is also the only country in Southeast Asia with double-digit e-commerce growth. In addition, Vietnam’s total export prong maintained its growth momentum, which will boost demand for paper packaging in the future.

In terms of production capacity, according to statistics from the Vietnam Pulp and Paper Association (VPPA), in the period of late 2020 and early 2021, there were eight industrial packaging paper factories put into operation with a total capacity and designed about 1.4 million tons/year.

Accordingly, by the end of 2020, with a capacity of about 800,000 tons by enterprises: Marubeni Group 450,000 tons/year, Khoi Nguyen Paper One Member Limited Company 120,000 tons/year, Phat Dat Paper Production and Trading Company Limited 100,000 tons/year. Annually, Global General Trading Production Co., Ltd., 80,000 tons/per year, and Tan Huy Kiet Trading Co., Ltd., 50,000 tons/per year.

These paper production lines will operate near the maximum designed capacity in 2021 and add more than 700,000 tons of paper to the market.

In 2021, it was expected that several other lines would be put into operation with a total design capacity of about 600,000 tons/year; in which; Miza Joint Stock Company will operate the line 120,000 tons/year, Hung Ha Paper Company Limited 100,000 tons/year, Hoang Van Thu Paper Joint Stock Company 100,000 tons/year, Viet Tri Paper Joint Stock Company 150,000 tons/year, other units about 100,000 tons/year.

VPPA also pointed out positive factors affecting the growth of packaging paper in Vietnam. The country’s export turnover target will increase by 5%, and the industrial production index will increase by 8% and maintain the same trade surplus as in 2020. Industries that use a lot of paper packaging set export growth targets. Exports will reach over 10% in 2021, such as agricultural, forestry, and fishery products and processed industrial products, including textiles, footwear, furniture, phones and components, computers, and outcomes: Electronics and components, vehicles, and spare parts.

The trend of moving industrial plants of FDI enterprises from large production centers to Southeast Asian countries or moving back to domestic production (multinational companies of Japan, the United States, EU) has changed countries’ structure and economic structure, including Vietnam.

Combined with that is the shift of businesses from China, Hong Kong (China), Taiwan (China), and Japan in processing export paper packaging due to the challenge of the 25% tax rate of the US. for China from the end of 2019 to the middle of 2021 began to have a high effect.

2021 is also a year when it is possible to take full advantage of the Free Trade Agreements (FTAs) that Vietnam has signed, especially the new agreements Vietnam-EU Free Trade Agreement (EU). EVFTA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), etc., have helped increase the number of industries with high demand for paper packagings, such as agriculture, fisheries, apparel and leather, mobile phones, and electronics. Domestic retail consumption is also forecasted to rebound strongly by over 10%.

According to the VPPA, restricting plastic waste and plastic bags and promoting alternative paper packaging shows signs of extensive and robust development in Vietnam by 2021.

In addition, the consumption of packaging paper in the world and Asia is forecasted to grow again by over 3.5%. Many countries and regions will issue orders to restrict or even ban the use of plastic bags, especially in major economies that will do this firmly in the period 2021-2022.

Export of packaging paper and paper packaging to the Chinese market in 2021 has a higher prospect than in 2020, as China is forecast to have a supply shortage of more than 5 million tons and may be higher when the ban on paper imports is withdrawn. The formula takes effect from January 1, 2021. Paper prices are higher due to pressure on domestic fees, primarily environmental and energy costs (an environmental tightening policy has been implemented since October 2020).

Export of packaging paper and paper packaging to the markets of countries participating in new trade agreements such as CPTPP. EVFTA will increase enormously due to tax incentives and growth in trade transactions.

However, in terms of challenges, exports to China will also have to compete fiercely with many other countries because China reduced the import tax on corrugated paper to 5% in 2020 for many countries before that. Over 7% depending on the country, while this 5% tax rate was previously only preferential to some Southeast Asian (ASEAN) countries.

What factors will help packaging paper businesses grow?

Vietnamese packaging paper manufacturers will also face many challenges, such as consumption competition among domestic manufacturers due to many new production lines being put into production; competition with imported paper: imported paper is expected to come stronger from countries in the region such as Laos (480,000 new tons), Malaysia (500,000 new tons) and from Indonesia, Thailand due to the domestic demand of Vietnam. They are low, so that they will increase exports to Vietnam.

Packaging paper manufacturers also face the challenge of a shortage of production materials, and prices remain high in the first six months of 2021 because the primary sources of recovered paper are North America, Europe, and Japan are still being affected. The COVID-19 pandemic strongly influences them.

Social distancing reduces the collection rate of paper materials; the lack of containers and freight is also a big problem, so the lack of raw materials and high prices are clearly shown. Meanwhile, the domestic collection is low, and the quality of raw materials is not high, not enough to meet the demand when the new capacity is expected to increase by 1 million tons.

Despite many significant challenges, paper enterprises have grasped the opportunities to raise well. VPPA said that in 2020, the total consumption of packaging paper would reach 4.286 million tons, up 0.9% compared to 2019. Although the consumption growth rate is low, compared to the general growth rate of the world, it decreased by 5 .0%; this is still impressive.

Notably, the export of packaging paper in 2020 reached 1,526 million tons, up 95.3% compared to 2019; this is the most significant export increase in the industry’s history.

2020 is also the year the paper industry has very positive business results, especially the strong growth of the packaging paper segment

For example, in Dong Hai Ben Tre Joint Stock Company (stock code: DHC), in 2020, the company’s net revenue from sales and service provision will reach VND 2,888 billion, more than two times higher than in 2019, while receiving profit after tax was 2.15 times higher than last year, getting nearly 392 billion dongs. This is the highest profit in 13 years.

According to Viet Capital Securities Joint Stock Company – VCSC, Dong Hai Ben Tre’s business results exceeded expectations mainly thanks to the paper segment. This securities company estimates that the paper business’s revenue in 2020 accounted for 88% of total revenue, and packaging revenue accounted for 12% of total income, increasing by 2% compared to 2019. Particularly in the fourth quarter, packaging revenue increased by 8% over the same period in 2019 and 5% compared to the third quarter of 2020.

Assessing the prospects of the paper industry in 2021, VPPA said that paper manufacturing enterprises have both opportunities and challenges. Still, Vietnam’s paper industry, especially those producing packaging paper, has and will surpass it. Overcome difficulties, and take advantage of opportunities to develop.

According to TTXVN


With more than ten years of operation in paper packaging, and built a brand reputation in the market. Hoang Vuong Paper Packaging Co., Ltd is proud to be a private packaging enterprise in Vietnam that many big domestic and foreign brands accompany.

Hoang Vuong Paper Packaging Co., Ltd always accompanies your company in finding creativity and seeking innovation and difference. Your success is the result and motivation for us to continue to be more creative and professional.

  • Address: 10/6C 10th Street, Binh Hung Hoa A Ward, Binh Tan District, Ho Chi Minh City
  • Phone number: 0908.863.965 (Mr. Le Hong Son)
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  • E-mail: havupackage@gmail.com
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