06/10/2021
Paper prices skyrocketed in EU, resulting in high prices in Vietnamese martket.
Price of raw materials in EU results in high price of paper in Vietnam (Source: Economy & Forecast Review)
Vietnam's packaging paper market
Although Vietnam is a leading country in exporting wood chips for pulp production, the paper packaging industry is heavily dependent on imported pulp sources.
Accordingly, firms are facing the input supply challenges and raw material prices remain high in the first 6 months of the year. Reasonably, the main supply of recovered paper is in North America, Europe and Japan, which are still being seriously affected by the pandemic situation. This is also a factor that makes it difficult for domestic packaging manufacturers.
European paper prices skyrocketed
Currently, the price of paper has skyrocketed in all segments: printer paper, packaging paper, pulp and even old newspaper scraps have also increased sharply in the European market. Paper prices have nearly doubled since the end of 2020.
According to the Corriere della Sera newspaper in Italy, pulp for the production of printer paper and cardboard has increased by 60-70% in just the first six months of the year. The price of old newspaper and recycled cartons also increased to a record, nearly half times, a ton of waste paper is currently priced at 155 euros, collected cardboard costs 170 euros/ton.
The Kurier newspaper published in Austria analyzed a number of causes for the current price “fever”, the first being a lack of old paper and collected waste paper.
The pandemic situation has caused firms to switch to online advertising, no longer printing as before. This has led to a decline in the amount of old paper and waste paper, leading to a shortage of raw materials because 75% of the input material for paper production is from recycled old paper.
The second reason is the sharp increase in demand for paper in Asia and the US, especially for packaging cartons, due to the sudden increase in online shopping since the pandemic. The American company Amazon has bought almost all of the cartons exported by Europe.
The final reason is buying chemicals, paying for electricity, all paper production costs go up.
Among those reasons, the lack of raw materials is the main one, according to the German newspaper Markische Oderzeitung.
Proposed solution for Vietnam market
According to the VPPA, many firms fall into crisis due to loss of business and input materials scarcity. Input materials for packaging production are mainly paper, but in the last 3 months, paper prices have increased sharply. On average, the price of domestic materials such as bales has increased by 40-50%, while imported paper has also increased by 20-40%.
What is more worrying is the scarce supply of paper. ASEAN countries cannot complete orders due to their high domestic demand and restrictions to limit exports for environment protection. The current domestic supply is not sufficient because we have too few facilities and the technology is not advanced enough to produce special papers. Meanwhile, the stable supply from Japan encountered very high import tariffs (up to 25%).
If this situation persists, packaging businesses will go bankrupt. In the current situation, the only way for businesses and the State is sharing. In particular, as paper prices increase, the State should consider a temporary reduction of import tax on paper. This will create favorable conditions for importing paper, helping to reduce the scarcity of raw materials and reduce costs. Otherwise, not only packaging enterprises will face difficulties, manufacturers and exporters will also be affected as product prices will increase, reducing the purchasing power of customers.
Accordingly, our country can invest in a large-scale pulp and paper production plant. Although it requires a lot of capital, domestic enterprises can fully cooperate to do it. It is important that the State have specific policies to support the development of this industry because the development involves policies on afforestation and raw material exploitation, forest protection and development, etc. This is beyond the capabilities of businesses.
Vietnam is a potential market for consumption, capable of developing and supplying raw materials. This will boost domestic production and exports. Production and export again accompanied the development of packaging. Therefore, the State needs to have policies to create conditions to develop the paper packaging industry in Vietnam to promote economic development as well as solve social problems.
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