Tuesday, December 6 2016

VietNamNews

Fierce competition for plastics sector

Update: November, 04/2016 - 09:00
Visiting the Hoa Sen Plastic Pipe Plant in Bình Định Province’s Nhơn Hòa Industrial Zone. -- VNA/VNS Photo Quốc Dũng
Viet Nam News

HCM CITY – Plastic firms in Việt Nam face fierce competition and risk being acquired by foreign companies, experts said Wednesday at a conference in HCM City.

Phạm Văn Bắc, deputy head of the construction ministry’s department of building materials, said the plastic industry had the potential to grow as plastic consumption in the country is still low, even as he acknowledged the challenges the sector faces.

As per the National Housing Development Strategy, annual housing sector growth is expected to be 5 to 10 per cent, equivalent to 1-1.2 million sq.m, which will increase the demand for building materials, including plastic.

There are two main products in building plastics - plastic pine and plastic profile – these are used for door and window systems, instead of wood and steel.

Statistics from the ministry show that a house has 40sq.m of doors and windows, on average. Of this, 35 per cent, or 15sq.m, is plastic. In addition, 80 to 90 per cent of construction projects have been using plastic doors and windows.

The demand for plastic rose from 37kg per person in 2013 to 41kg in 2015. This level is still low, compared to both the average 48.5kg per person in the ASEAN region and the world average of 69.7kg. The US has the highest demand for plastic, with an average of 150-169kg per person per year.

“The rising demand means that local plastic firms have the opportunity to increase their market share by making investments to improve technology and capacity,” Bắc said.

The recovery of the real estate and construction sectors has stimulated demand for plastic products, Đặng Trần Hải Đăng, deputy director of VietinBank’s research centre, said. The plastic sector also has a prosperous outlook, thanks to the many free trade agreements Việt Nam is part of. 

But the local plastic sector must face the challenges of competition from foreign producers and the risks of unstable imported materials and supplies, Bắc said.

Many foreign plastic companies have invested in Việt Nam to take advantage of land leasing and tax incentives, plus the availability of cheap materials, among other things. Foreign investors prefer acquiring local companies with proven market share and good performance to save money.

Đặng listed some major acquisitions since early 2016, including Korea’s Dongwon Systems Corporation takeover of Minh Việt Packaging One Member Company Ltd. 

Thailand’s SCG Building Materials is planning to invest US$6 billion to consolidate its position in the Vietnamese plastic market, he said.

"Foreign companies are making inroads into the Vietnamese market and putting pressure on domestic production," Đặng said. "Their experience and financial potential will help them benefit from the free trade pacts."

Nguyễn Bá Hùng, chairman of Đông Á Plastic Group (DAG), said most domestic plastic producers are using old technologies which affects their competitiveness. “DAG has gradually replaced its technology with those from Europe. We will invest around $1 million for research and development in the near future,” Hùng said.

The BIDV Securities Corporation has forecast that the average demand for plastic products will increase to 45kg per person per year in 2020, which represent an annual growth of 4 per cent. -- VNS

 

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