Strengths of Vietnam’s plastic sector

Strengths of Vietnam’s plastic sector

I FOCUS 3

1 Strengths of Vietnam’s plastic sector 4

1.1 Overview 4

1.2 Strengths of Vietnam plastic products by clusters 4

2 Production 6

3 Plastic manufacturing technology 6

4 Domestic Consumption 7

5 Exports 7

5.1 Export Products 8

5.2 Export Markets 9

6 Development Orientation and Policies 11

II TRADE PROMOTION ACTIVITIES 13

III VIETNAM NATIONAL BRANDING PROGRAM 16

IV LIST OF LEADING VIETNAMESE PLASTIC PRODUCERS 19

V USEFUL ADDRESSES 22

I FOCUS

Vietnam’s plastic industry includes about 2,000 businesses from North to South Most (83%)are in the South - Hochiminh city, Binh Duong, Dong Nai, Long An, and Ba Ria Vung Tau.The North has 13% of them, and the Central 3%

Plastic products having a great competitive edge are packaging, household products, andconstruction and engineering plastics Vietnamese plastic products are, in the main, exported.These plastic products have gradually reached the point to where they control the market ofseveral countries

In the domestic market, Vietnamese plastic products are present in most industries agriculture, transportation and communications, seafood and fishery, construction, electricsand electronics sectors, etc Products requiring high quality such as oil pipelines, plastics forcar and computer industries are being produced successfully in Vietnam

-In overseas markets, Vietnamese plastic products are known for their outstandingcompetitiveness After all, the industry’s manufacturing technology is right there with thebest in the world as for modern technology, thereby earning market acceptance Vietnameseplastic products are sold in over 150 countries, including Japan, Cambodia, Laos, Thailand,China, India, Africa, EU, and USA

Among export markets, Vietnam plastics have earned firm entrenchment in Japan, and add tothat new potential markets such as China, India, Russia, East Europe, and Africa with theirdemand for plastic packaging, and household and construction materials

Application Splits for Plastic Usage in Vietnam

Source: Vietnam Plastics Association

1 Strengths of Vietnam’s plastic sector

- Several businesses have built up their brand prestige in local market; examples are BinhMinh JS Co., Tien Phong, Minh Hung plastic pipes; Plastic packaging of Tan Tien, RangDong, Van Don JS Co., PET bottles and 3-layer bottles of Oai Hung, Ngoc Nghia, and TanPhu Plastic Co

- Some businesses have constant overseas orders of quite great quantity; examples are RangDong Plastic JS Co with their tablecloths and synthetic leather products, Tan Dai HungPlastic JS Co with PP woven bags, and Hung Yen Plastic JS Co with HDPE shopping bagsand garbage bags

1.2 Strengths of Vietnam plastic products by clusters

a) PE films and bags

- Printing capability: Some Vietnamese manufacturers demonstrate their ability to care for anice printed bag that could constitute a plus for the Vietnamese manufacturers whencompared with Chinese manufacturers, as well as an ability to remain flexible and deal withsmaller orders

- Fast development of internal demand will also support export; for instance the plasticpackaging supply to the growing domestic export businesses in food, electronic equipmentand garments will make the critical mass for production achieved faster

- Some established contacts with international-buying decision-makers exist already and may

be consolidated Further, Vietnam’s image in developed nations seems good and may befurther capitalized

- The ability to reduce film thickness through optimum choice of resin is not obvious Theresin available in Vietnam is considered adequate

b) Woven webbing and bags

- This segment includes the following products:

 Consumer (essentially heavy-duty multi-trip Reusable shopping bags)

 Industrial 25 kg bags

 Leno & Rachel bags

 FIBC (flexible intermediate bulk containers)

 Agricultural, Construction & Tarpaulin

- State-of-the-art manufacturing capabilities of the Vietnamese operators are presented in thissegment; LOHIA STARLINGER lines, at tape extrusion and stretching level as well asweaving level, which offer good overall competitive performance against best competitors.Relative homogeneity of origin of machines makes monitoring of performance andmaintenance easier within the country

- Combination of cheap and skilled employees for product confection and assembly usingtextile-based sewing technology is a plus

- ISO certification is now in place and running Implementation of quality control for thewebbing products is a prerequisite for establishing recognition of quality supplier

d) Sheets extrusion & formed containers

- There is one competent and dedicated operator who invested in a co-extrusion art line

state-of-the-e) Injection molding products

- Low cost resulting from low labor cost essentially and dependability for some relativelysimple injection molded parts such as those close to consumer goods

- One operator has the advantage of performing with a large clamping force machineallowing injection molding of large parts such as pallets

f) HDPE blow molding products

- Ability to network with local companies involved in the supply of labels and shrink sleeves for quality print on small blow molded containers

g) Flexible packaging tubes

- The cluster has a complete range of products, which covers all packers’ needs and hascertification credentials

- One world-class operator procured a co-extrusion state-of-the-art line, and 8 color printingcapability

- The cluster seems to manage well its promotional tools, including facilitation ofinformation supply for export such as quantity per type of product and per 20’ containerloads

- The cluster has a track record of multiplicity of clients that implies an ability to also servemodest-sized markets and orders

2 Production

Vietnam’s plastic output grew steadily and strongly at an average of 15% a year over the pastdecade Despite the global economic downturn and sharp price fluctuations of plastic

materials in 2008, plastic output reached 2.3 million tons, up by 22 percent against 2007 Thecountry’s plastic industry is expected to continue this upward trend for many years to come

Figure 1: Vietnam’s plastic output in 2000-2010 (in thousand tons)

Source: Vietnam Plastics Association

Of the total annual plastic output, plastic packaging accounts for 36% while plasticconstruction materials, house-ware and components for other industries such as electronics,electrical and transportation account for 16%, 36% and 12% respectively

3 Plastic manufacturing technology

The technology Vietnam uses to produce its broad array of plastic products includes:

Injection technology: This technology is used to make plastic components and parts for the

electronics, electrical power, motorbike and automobile industries According to industryexperts, there are approximately 3,000 pieces of injection equipment in Vietnam

Blow-Extrusion technology: This is a pellicle-blowing technology to make plastic packaging

materials from pellicles This technology is used for blowing polyethylene (PE),polypropylene (PP) bags and PVC pellicles A large number of plastic product manufacturers

in Vietnam are using blow-extrusion machines to produce plastic packaging products,including PET bottles and kegs

Profile technology: In Vietnam, this technology is used for making such products as water

drainage PVC pipes, water supply PE pipes, aluminum-plastic pipes, optic cables, PVCdoors, frames, roofing, and wall coverings

Generally speaking, advanced plastic manufacturing technology is used in Vietnam, althoughnot as widely as it could be Since 2005, many plastic manufacturers in Vietnam haveinvested considerable money in upgrading their manufacturing equipment and machinery toimprove their products in terms of quality and design, thus being able to competesuccessfully in domestic and international markets For instance, a few large firms aremanufacturing high-quality and hi-tech plastic products by using advanced equipment andmachines imported from Germany, Italy and Japan This trend will continue as theVietnamese plastics industry strives to maintain competitiveness and extend reach in worldmarkets

4 Domestic Consumption

Vietnam’s plastic manufacturing industry has sustained particularly high growth thanks tothe significant increase in both domestic consumption and exports since 2000 Plasticconsumption per capita in Vietnam was only 1 kg/year in 1975 and remained static until

1990 Consumption per capita grew steadily until 2000 when each person living in Vietnam,

on average, consumed 12 kg/year, and this trend continued; in 2008, for example, the figurewas 34 kg/person

The government of Vietnam expects consumption per capita to reach 40 kg/year in 2010.This dramatic increase in plastic consumption per capita is, for the most part, attributed to asoaring foreign direct investment inflow; the robust growth of Vietnam’s manufacturing,construction and transportation sectors; and the growing per capita income of the Vietnamesepeople, in the wake of the implementation of the “Economic Renovation” policy beginning in

1986

Figure 2: Vietnam’s plastic consumption per capita growth (in kg/person)

Source: Vietnam Ministry of Industry and Trade

5 Exports

2010 was a brilliantly successful year for Vietnam plastic exports, with export revenue forthis product surpassing 1 billion USD for the first time According to the General CustomsBureau official records for 2010, total export revenue of Vietnam plastic products was1,049,000,000 USD, surpassing 2009’s by 30% Total export revenue exceeded 2010’s target

by 5% This is considerable growth by Vietnam plastic industry, showing a strong recovery

of the industry after the 2008 financial crisis, a positive sign of a bold development seen inVietnam plastic industry and giving a signal for a fully successful year for 2011

Vietnam’s export revenue for plastics grows constantly Contrast that 1+ billion of thepresent with 2005’s export revenue of a mere 336 million USD Vietnam plastics areexported to, for example, Japan, USA, The Netherlands, Germany, Cambodia, UK,Indonesia, and Malaysia, and have been shipped to 151 countries

Figure 3: Vietnam plastic export revenue in 2004-2010 (in million USD)

Source: National Statistics/Vietnam Plastics Association

Spilt of Plastics Products for Export 2010

Source: National Statistics/Vietnam Plastics Association

Product categories having highest export revenue in the year 2010 were products used intransportation, packaging which are also Vietnam’s core export products Year 2010 totalexport revenue of these categories totaled 387 million USD, a year-on-year increase of 12%.These products are accounting for highest export value equivalent to 37% of general export

revenue of 2010 Main import markets of these products in 2010 included Japan, Germany,

UK, USA, and Cambodia

2009-2010 Export Plastic Products Categories

(USD) (USD) 2010 2010/2009 (%)

Products used in forwarding and packaging 345,360,475 387,141,656 12.1

Small statues, flower pots, and ornamentals 36,858,418 48,839,807 32.5

Safety and safeguarding equipment, tools 4,991,762 3,208,955 -35.7Sanitary, medical and surgical products 1,853,111 2,567,475 38.5

10 main export markets of Vietnam plastic products in 2010

Japan has been a leader for importing Vietnam plastic products since 2009 with Vietnam’s

export revenue in that regard for 2010 registering year-on-year strong growth with 259million USD, up 32% Export revenue accounted for by the Japan market was 25% of totalexport revenue of plastic products in 2010 Products most exported to this market are:products used in transportation; packaging such as plastic bags, shopping bags and plasticboxes; and industrial and household plastic products

The US, no surprise, is a big market that had a year-on-year lower export revenue in 2010

with just 107 million USD, down 19% compared to 2009’s The reason of this drop was the

US anti-dumping tax applied from August 2009 against Vietnam plastic bags and shoppingbags, bringing about a considerable fall of products used in packaging; this is a core exportproduct of Vietnam and significant in export revenue This situation lasted from August 2009until the end of 2009 and affected the year 2010, despite Vietnamese businesses’ great efforts

to make headway into this market, changing their product export structure in recent 2010.The US market also accounted for a considerable portion of total export revenue of plasticproducts (10%) Plastic categories responsible for the most exports to the US are productsused in transportation, packaging, plastic boards, sheets, films, household plastics, andtarpaulins

Exports to EU in 2010 also registered admirable year-on-year growth with a high revenue of

49 million USD, up 32% against last year The 2010 exports to France amounted to 24 million USD, a year-on-year increase of 8% Exports to Italy were up 2% compared to last

year with 17 million USD

Exports to Germany rose significantly last year with export revenue of 69 million USD, a

year-on-year increase of 29% Germany at the moment is a potential market for Vietnam’splastic products; it has been associated with constant growing export revenue in 2010.Germany market revenue accounts for 7% of total 2010 export revenue of plastic products,and is expected to maintain that strong growth in 2011 Product categories exported to thismarket mainly include products used in transportation, packaging, tarpaulin and householdplastic products

Exports to the Netherlands continued to rise in 2010 with annual export value of 64 million

USD, a year-on-year increase of a staggering 45% Of course the Netherlands is seen as apotential market offering superb opportunities to Vietnamese exporters Two most-exportedproducts categories to the Netherlands are: products used in transportation; packaging; andsmall statues, flower pots, and ornamentals

All exports to Belgium, Spain and Sweden markets surpassed 10 million USD in 2010, of

which highest revenue came from Belgium with a year-on-year increase of 41%.Expectations are that 2011 export revenue associated with EU markets will have highergrowth than 2010

Cambodia is the ASEAN leading market importing Vietnamese plastic products in 2010

with revenue of 58 million USD, a year-on-year increase of 50% which is expected to keepgrowing vigorously in 2011 Most-exported to this market are products used intransportation, packaging, household plastic products, ornamental stuffs …

Exports to other markets in ASEAN also had very strong growth in 2010 of which Indonesia

had a year-on-year rise of 126% with 43 million USD Exports to remaining markets rose

boldly in 2010, especially the Philippines and Singapore markets had year-on-year growth

of 80% in 2010 Considering the geographical conditions and tax barriers, the forecastgrowth in 2011 export revenue from markets in the ASEAN region is considered quite fine

Revenue from 10 export markets of Vietnam’s plastic products

Source: Vietnam General Statistics Office

6 Development Orientation and Policies

The plastic industry should focus on developing products requiring high technology, highcapacity manufacturing lines, investment projects with strong financing to create superiorvalue-added products with high grey matter content such as investment in raw materials andchemicals for the plastic industry, high-grade packaging, special oversized pipes, plasticcomponents and accessories for product localization in automobiles, motorbikes,refrigeration and electric industries

Urgently build up raw material manufacturing facilities for plastic processors To join closelywith involved industries such as oil and gas processing, chemical industries exploitinginvestment capital sources including overseas sources to build raw materials’ plants Meetingraw materials supplier demand should be regarded as the highest priority in plastics’development strategy

Gradually change products’ structure, focusing on those of high competitiveness, high value and eco-engineering products

added-In first-stage high technology, modern and highly automated equipment should receiveinvestment After mastering technology, studies should be implemented to engineeringproducts locally and partly then for whole line to satisfy domestic production

To focus on investment of plants for manufacturing raw materials, chemicals and finished products, additives, molds, equipment for plastic industries, high-output capacityplants, application of modern technology and equipment together with investment inproduction expansion of existing plants

semi-2010 – 2025’s Target Growth by Plastic Products Group (Unit: %)

Source: Vietnam Plastics Association

On 17 June 2011, the Vietnam Ministry of Industry and Trade approved a plan for thedevelopment of the plastic sector until 2020 and vision toward 2025

Plastics’ export revenue is expected to reach US $2.15 billion and US $4.3 billion by 2015and 2020, respectively.

The Ministry estimated that the plan need investment of around VND 175,530 billion withinthe next decade, of which 88,624 billion is for 2011-2015 and 152,442 billion is for 2016-2010

ORIENTATION FOR PLASTIC RAW MATERIALS DEVELOPMENT:

Local raw materials production is just satisfying 15% of processing demand, a percentageneeding to rise to about 50% in 2020 Taking some initiative in local raw materialsproduction is gradually becoming urgent, and this is a great opportunity for domestic andforeign investors, especially to suppliers of equipment for the production of PP, PVC, PS and

PE – basic materials for plastics processing Developing opportunities for the industry arealso the driving force for Vietnamese petrochemicals industry development This will be also

a promising future for the Vietnam plastic industry

+ 2011 – 2015 Development plan:

- 175,000 tons/year capacity of polyester fiber plant in Dinh Vu IPZ, Hai Phong Investmentform: joint-stock company between Petrovietnam and Vietnam Garments and TextilesGroup Total investment capital: about 300 million USD Expected commissioning schedule:2012-2013

- 350,000 tons/year capacity of PE plant, Dung Quat – Quang Ngai Investment capital: 320million USD Expected commissioning schedule: the year 2013

- 60,000 tons/year of PS plant, Dung Quat – Quang Ngai Investment capital: 70 millionUSD Expected commissioning schedule: the year 2012

- 30,000 tons/year capacity of Melamine Plant – Phu My – Vung Tau Investment capital:

140 million USD Expected commissioning schedule: the year 2013

- PP resins plant in the South, capacity 60,000 tons/year, investment capital 200 millionUSD

Source: Vietnam Plastics Association