Pulp operation too expensive for local makers, official says

Vietnam’s paper industry is under high pressures this year as the input costs of local makers moved up on the increasing global material prices. Many paper production investments were halted due to a shortage of capital.

Dau Tu Tai Chinh Newspaper has caught up with Vu Ngoc Bao, general secretary of the Vietnam Pulp and Paper Association to interview about the issue.

Dau Tu Tai Chinh: Vietnam has great sources of plants, which can be used as materials for paper production. Why do we still have to import materials from abroad?

Vu Ngoc Bao: Vietnam has significant potential of producing pulp, ranking second in the world among the largest wood crop [material for pulp production] exporters.

However, local paper producers still have to import pulp from abroad as the cost of set up a pulp factory is extremely expensive, which just a few of local investors can afford.

We also lack policies that can attract foreign pulp makers to enter the market. Vietnam is an agricultural country, which can provide a huge amount of straws for pulp production.

But there is no study assessing the feasibility of the matter and the government also has no detailed policy on it.

What do you think about the fact that many paper makers are suffering losses?

Pulp cost has been highly volatile recently, causing losses to local businesses. Many companies using high-cost pulp to produce paper had to cut their selling prices as the material cost suddenly plummeted.

They had to ignore the losses to keep customers. Some small producers early this year raised their prices after holding up for a while. But the increase was not much as the two leading producers including Vietnam Paper Corp and Tan Mai Group made no move.

They eventually raised their prices by 5.7 percent and 10 percent respectively in February.

Many paper investments are halted. What is your opinion about that?

There are two kinds of investment projects in the paper sector now.

Among the first kind are investors registering for land use license to build paper plants, but then carrying out the project at slow pace in a long time in an attempt switch their land use to other purposes, which helped them to earn more money.

Others really want to enter the sector, but struggling to kick off their investment projects due to the global economic turmoil.

Among the big investment projects that were undone due to the mentioned problem are Lee & Man in the Mekong Delta province of Hau Giang, work on pulp plant Phuong Nam and a pulp and paper plant in the northern province of Thanh Hoa. – SGGP

Tags: Vietnam paper industry, Vietnam paper prices