Plastic exports increase despite many difficulties

The plastic industry in the 2010 – 2020 period was one of the industries with the highest growth in Vietnam. Currently, Vietnam's plastic products are present in nearly 160 markets around the world.

The highest growth industry

In the world as well as in Vietnam, the plastic industry is still young compared to other long-standing industries such as mechanics, electricity - electronics, chemicals and textiles, but there has been a strong development in the industry in recent years.

According to the Ministry of Industry and Trade, the plastic industry saw annual growth of 16% - 18% (after telecommunications and textiles). Some items have a growth rate of nearly 100%/year.

The traditional export markets of Vietnamese plastic companies are Japan, the US, some European countries (Germany, Netherlands) and ASEAN (Cambodia, Indonesia, the Philippines). Recently, Korea has become a new major export market for Vietnamese plastic exporters.

According to preliminary statistics of the General Department of Customs, in the first six months of 2021, the export of plastic products increased sharply by 41.5% over the same period in 2020, reaching nearly US$2.33 billion, accounting for 1.5% of the total export turnover of all kinds of goods of the whole country.

Vietnam's plastic products are exported mostly to the US market, accounting for 36.5% of the country's total export turnover of this product group; followed by the Japanese market with US$331.53 million, accounting for 14.3%.

According to the Ministry of Industry and Trade, Vietnam's plastic exports mainly come from FDI companies (accounting for 60% of the industry's export value). These companies use advanced technologies that meet the quality standards of foreign markets. The main export products of Vietnam's plastic industry are plastic bags, or accessories and components with low added value.

Although the export prospects of Vietnam's plastic industry is actively supported by the Free Trade Agreements that Vietnam has joined, the representative of the Ministry of Industry and Trade said that the Vietnamese plastic industry still faces limitations from the export market. Specifically, the trend of shifting to using environmentally friendly packaging in Europe is spreading, while the US still imposes anti-dumping tax on PE plastic bags imported from Vietnam.

Too dependent on imported materials

According to the Ministry of Industry and Trade, there are still many limitations hindering the development of Vietnam's plastic industry. The main input materials of the plastic industry are PE, PP, PVC, PS and PET plastic powders and granules, which are produced from oil, gas and coal.

Of which 75%-80% of input materials and accessories for plastic production must be imported because the current domestic supply can only meet about 1 million tons of raw materials and accessories (mainly PVC plastic PET and PP). Especially, there is a lack of supply of recycled plastic materials and the supporting industry has not been developed.

The cost of raw materials accounts for the highest proportion in the cost structure of the plastic industry. However, Vietnamese plastic companies cannot proactively supply domestic materials. This situation leads to plastic companies maintaining large inventories of raw materials to ensure uninterrupted production and business activities.

“This is followed by increased financial costs, plus the risk of changes in exchange rates and world oil prices. This limitation is a common feature of the whole plastic industry in Vietnam and is unlikely to change in the next few years. In addition, a large amount of input materials must be imported, which will make it difficult for companies to export plastic products to take advantage of tax incentives due to regulations related to the origin of goods," said a representative of the Ministry of Industry and Trade.

Another limitation mentioned by the Ministry of Industry and Trade is that Vietnamese plastic products are mostly of the low-end segment, so small and medium-sized companies (accounting for more than 90% of the total 2,000 plastic companies) are often less focused on investing in modern technology and machinery. In addition, small and medium-sized companies often face difficulties in accessing loans due to limited collateral and high interest rates.

There are only a few companies with large production scale that make intensive investment and have products that meet the increasing needs and tastes of consumers. This hinders the competitiveness of Vietnamese plastic products in the market, especially household plastic products.

Source: Custom News