Shortage of raw material for paper getting serious

The shortage of raw material for paper industry since the beginning of the year is getting more and more serious. Many businesses could not find pulp thus had to shut down some machines and reduce paper output by half. Furthermore, prices for pulp of all kinds have been rising significantly and continuously from April 2009 to date, averaging six percent monthly. Thermal-mechanical pulp price has gone up from $610 to $850 per tonne (for short fibre pulp) and to $900 per tonne (for long fibre pulp), waste paper price from $130 to $270 per tonne.

Imported raw material prices, in general increased 1.5 to two times higher than before. In addition, local waste paper source is also scarce with price increased from three to 3.7 million dong per tonne.

Facing the above-mentioned situation, paper production firms have to adjust the selling price of paper. However, under the general view of the society to maintain stability in prices of essential goods, paper manufacturers should be cautious in adjusting the price.

For printing and writing paper, if the selling prices have to go up accordingly to the increase of imported raw materials, importers would have excuses to push the paper price up, while consumers would turn their back to domestic paper products.

There are two sources of raw materials for paper mills. One is from waste paper (used paper) and one is from wood pulp made from plant materials. Currently, 72 percent of the materials are from waste paper, of that, about two third must be imported from overseas.

According to Vu Quoc Bao, general Secretary of the Vietnam Pulp and Paper Association (VPPA), in 2010, it is forecasted that paper industry would use of 1.35 million tonnes of waste paper, of which 0.8 million tonne from domestic waste paper collection. Under the current regulations, the import rate for this kind of paper is 0 percent.
Domestic paper collection will also enjoy tax deduction if VAT invoices are presented.

Nevertheless, because waste paper is collected from small sources, the sellers usually donot offer VAT invoices. Therefore, in order for the tax authorities to approve the cost of paper, the collecting businesses have to pay three percent income tax for the sellers and also pay VAT. Thus, in fact, the buyer of domestic waste paper has to pay VAT of 750,000 dong for a tonne. Whereas, they would only have to pay 400,000 dong per tonne when purchasing waste paper from overseas. If the state adjusts the tax policy more suitable for the paper production businesses, they not only would save large amount of domestic waste paper, but also positively contribute to curb trade deficit and protect the environment.

For pulp material sources, domestic production capacity can meet 60 percent of the demand from paper mills; the rest should be imported. In order to reduce this dependence, the only solution is to develop areas for paper materials and invest in pulp production line from plant materials.

Some paper-manufacturing units have rather good preparation for this issue. Tan Mai Paper Joint Stock company has bought a whole plant, including four pulp and paper mills from Canada to build up four new mills. The two mills in Kon Tum and Dong Nai are under construction. The mill in Quang Ngai will go under construction in the beginning of July.
In the near future, another mill will be built in Lam Dong province.
When all four mills are in operation, Tan Mai will add in 350,000 tonnes of paper and 450,000 tonnes of pulp of all kinds (not including the 120,000 tonnes of paper and 90,000 tonnes of pulp from the existing production lines).

Tan Mai has invested in 50,000-hectare tree material plantations. In order to have location for growing material forest, Tan Mai has prepared 17,000, 68,000 and 16,400-hectare land areas to supply Kon Tum mill, Quang Ngai, and Lam Dong mills, respectively. For years, Vietnam Paper Corporation has built up a stable material zone with a total area of over 100,000 hectares in the Northern provinces.

Vietstock

Tags: Vietnam paper industry