SCG Paper considers a second plant in Vietnam

SCG Paper is considering building a second plant in Vietnam with investment up to Bt4 billion to serve rising domestic demand for industrial paper driven by economic expansion.

“We believe demand for paper in Vietnam will grow at 1.4-1.5 times its economic growth,” Chalokeporn Phalajivin, director-general of Vina Kraft Paper Co Ltd, said last week.

Vina Kraft Paper is a 70:30 joint venture of SCG Paper and Rengo Co Ltd, with total investment of Bt6 billion.

Demand for paper in Vietnam was one million tonnes a year and surging 10-11 per cent per year, while local production averages 800,000 tonnes a year.

Vietnam is one of the world’s fast-growing economies and one of the Asean countries that has been given importance by foreign investors. Economic growth there was 6.7 per cent last year and is expected to continue at 6-7 per cent annually over the next five years.

The new plant with estimated capacity of 220,000 tonnes annually would likely be located on the site of the first plant, which uses 60 per cent of the space. It would need two years of construction after approval by the Board of Investment.

The first factory started operating in 2008 with a capacity of 220,000 tonnes a year.

About 95 per cent of the raw materials for industrial paper come from recycled paper and 5 per cent from pulp and paper. The output of Vina Kraft Paper is used for making corrugated containers.

Dhep Vongvanich, executive director for SCG in Vietnam, said the business the group has invested the most in Vietnam is the paper business.

However, inflation was a concern and might overshadow the depreciation of the dong, as more than half of the raw materials used for paper production in Vietnam was imported from Thailand.

As part of SCG’s five-year business plan for expansion in Asean, the group was seeking possible merger and acquisition deals in Vietnam.

SCG Paper’s Thai Containers Group Co Ltd (TCG) and Japan-based Rengo jointly took over Alcamax Packaging (Vietnam), making it a market leader in corrugated containers in Vietnam with total capacity of 102,000 tonnes a year.

In Asean, TCG produces 794,000 tonnes a year of corrugated containers from plants in Thailand, Malaysia, Singapore and Vietnam.

Vina Kraft Paper targets sales increasing 20 per cent to Bt3.2 billion this year, which would boost its market share to 20 per cent from 18 per cent last year, said Chalokeporn.

SCG Paper, the largest fully-integrated producer of pulp and paper in Thailand, has a total capacity of paper, packaging and corrugated containers of 3.2 million tonnes a year, with production bases in Thailand, Malaysia, Singapore and Vietnam.

It earned Bt3.49 billion on total sales of Bt50 billion last year, boosted mainly by higher paper prices and improved sales in Vietnam.

Tags: SCG Paper, SCG Paper plant in Vietnam