Vietnam’s paper industry buffeted by high and volatile pulp costs

Rising inputs prices are stressing paper products makers and users, according to Thoi bao Kinh Te Saigon. Many are taking temporary losses in order to retain clients. They dare not sign new long term contracts because they can’t guess which way prices will move.

Some larger member firms of the Paper and Pulp Association (VPPA) have been operating at moderate level, but some small enterprises have halted production. They are not accepting new orders because the price of pulp and used paper has gone sky-high, says Vu Ngoc Bao, VPPA’s Secretary General.

Pulp is nearly $1000 per tonne, nearly double a year ago. The price of used paper has increased by six-fold; it currently fetches $300 per ton.

Some enterprises say that the problem is lack of supply. Thai and Chinese paper producers that previously accepted any big order now are rationing products. Meanwhile, Vietnamese papermakers cannot meet the high demand.

The sharp increases in paper prices have forced companies that use paper in their own products to think of raising sale prices. At a notebook and office stationery company, its business director said that the price of printing and writing stock has increased by 14 percent since the beginning of May, to 19 million dong per tonne. The company has had to increase the sales price of its notebooks by 250-450 dong, though the increase will make them less competitive with imports from China.

Nguyen Mai Minh Thu, whose company makes paper packaging, says she can now only buy paper in limited quantities and must pay immediately in cash. Thu said that the prices change every day. She once was slow by one day in making payment, and the supplier refused to deliver products, reasoning that the paper price had gone up overnight.

Thu complains that though the cost of the paper she uses has increased sharply, she cannot raise her prices to cover expenses. Instead, she has to endure losses to retain clients.

Truong Minh Tuyet, Head of the Business Division of Vietnam Packaging Company, said that paper price are changing as rapidly as shares prices. Paper of different kinds is all up by 30-40 percent just in a short time.

Ivory paper, for example, which was16 million dong per tonne before Tet, is now selling at 24 million dong.

Some explanations

The sharp rise in paper prices is so unusual that some say they suspect that speculators are at work, as once happened with cement and steel.

Bao from VPPA neither confirms nor rejects that idea. He says there are many factors pushing prices up. Production of both pulp and finished products plunged last year when the economic crisis cratered demand. Now demand is up again, says Bao, but pulpmakers can’t yet keep pace. A forest fire in Argentina, the biggest pulp supplier in the world, has resulted in a serious shortage of materials, thus leading to the jump in the paper prices.

Meanwhile, Vietnamese producers can meet only 40 percent of demand for the materials and finished products of the market.

Since the supply of input materials is unstable, some paper plants have been running at below capacity. The total output of paper in 2010 is expected to decrease, which will likely lead to higher paper prices in the near future.

Bao cites some other reasons behind the paper price increases, including the electricity, water and fuel price increases, the depreciation of the dong against the dollar, and higher bank interest rate changes. Electricity cuts have also reduced the capacity of paper plants by 15 percent in the last two months.

According to Bao, Vietnam’s paper trade deficit is about $1.6 billion per annum.

Thoi bao Kinh te Saigon

Tags: Vietnam paper, Vietnam paper industry