Overview of Vietnam’s pulp and paper industry in 2023

According to statistics, Vietnam’s paper industry in the first months of 2023 will face many difficulties because both production and consumption tend to decrease significantly compared to the same period last year. These difficulties have forced the industry to take practical actions so that paper export turnover tends to increase in the last months of the year. Let’s join Viet Linh in looking back at the paper market through 2023 and clarifying market assessment in the last months of this year.

Raw materials for paper production in 2023

Join Viet Linh to look back at domestic paper materials and the amount of imported pulp to help the paper industry develop.

Pulp

Vietnam’s pulp and paper production industry is still largely dependent on imported pulp supply. The amount of domestically produced pulp is currently small and cannot meet the supply.

According to VIRAC’s report, the output of domestic pulp enterprises, mainly producing bleached pulp from hardwood, only meets about 35% of the demand for pulp used for domestic paper production. The remaining 65% must depend on imported pulp supply, mainly from North America and Latin America markets.

Proportion of pulp supply sources for domestic paper production

According to VIRAC’s report, in the first quarter of 2023, pulp production output is estimated to reach about 42 thousand tons, an increase of more than 5% over the same period. The reason is said due to the demand from paper factories in the first quarter has recovered and increased stronger than the same period last year. Secondly, because factories are no longer in a labor shortage situation like in 2021-2022, operating capacity is maintained again at optimal levels. In addition, the supply chain of raw materials for the paper and pulp industry is also being restored thanks to logistics growth and open-door policies from post-COVID countries.

Chemical pulp production output of Vietnam

Besides, also according to VIRAC’s report, Vietnam’s pulp import volume in Q1/2023 is estimated to reach about 78 thousand tons, an increase of about 5.5% over the same period last year.

Vietnam’s chemical pulp import volume

Through this, we can see that Vietnam imports quite a lot of pulp, which affects the cost of raw materials, the price of paper and the wood production industry in Vietnam. So why is Vietnam a country with a large amount of wood chips and pieces of wood but still has limited amounts of pulp for paper production? According to industry experts, the assessment is as follows:

• The supply in our country all comes from small sources, which makes it difficult to concentrate raw materials to produce pulp.
• Due to lack of investment sources; whilst building a manufacturing factory can be substantially costly, requiring businesses to have large economic potential to deploy this segment.
• The third issue is about the state’s policies. Currently, the State does not have a specific policy to develop large raw material areas. Additionally, state-owned forestry enterprises are distributing land to each household. Therefore, it is very difficult to negotiate the source of raw materials with each individual and each household, even though some businesses have tried to implement it.

Recovered paper

In addition to pulp, recovered paper is also considered an indispensable source of raw materials to support the development of the paper industry. This source comes from the gathering of used paper in the country. The recovery and reuse of paper has been paid attention and encouraged by the government in schools, classes, and educational levels.

In addition, the paper industry also imports recovered paper from other countries. According to VIRAC’s report, in the first quarter of 2023, Vietnam’s recovered paper import volume is estimated to reach about 1 (1.05) million tons. Among them, the US, Europe and Japan are important recovered paper import partners of Vietnam, with the proportion of imports coming from these markets accounting for about 75%.

Vietnam’s recovered paper import volume, 2019 – Q1/2023

Paper production situation in the first months of the year

According to VIRAC, Vietnam’s paper production output in the first quarter of 2023 is estimated to reach about 1.4 (1.38) million tons, down slightly by 0.01% compared to the same period in 2022.

Vietnam’s paper production output 2020 – 2023

However, by April, the production situation decreased sharply, causing the total amount of paper production in the first 4 months of all types to decrease by more than 12% compared to the same period last year.

Vietnam’s paper consumption volume, 2020 – 2023

According to VIRAC’s report, in the first quarter of 2023, paper consumption in Vietnam is estimated to reach 1.2 million tons, down more than 20% compared to the same period in 2022. In particular, packaging paper is considered as the driving force for growth of the paper industry. However, in the first quarter of 2023, packaging paper consumption is estimated to reach about 900 thousand tons, down more than 26% compared to the same period in 2022.

Based on the above numbers, it can be seen that 2023 is a difficult year for the pulp and paper industry. Under the impact of supply far exceeding demand, consumer demand shows signs of a sharp decline.

In fact, the paper industry is currently the main industry supporting the production of most fields, so recently when the manufacturing industry declined, it also led to a decline in paper consumption. About 90% of the domestic paper industry’s output is common packaging paper products serving industrial production. During the period from September 2022 until now, businesses in the paper and pulp industry have faced many difficulties due to a decline in orders.

According to the comprehensive report, the difficult consumer market also strongly affects the revenue and profits of paper industry enterprises. For example, at Dong Hai Joint Stock Company of Ben Tre, revenue in the first quarter of 2023 reached 848.4 billion VND, down nearly 18% compared to the same period in 2022. Or HAPACO Group Joint Stock Company also recorded revenue In the first quarter with 74.5 billion VND, a sharp decrease of 45.2% compared to the same period in 2022. As for Sadico Can Tho Joint Stock Company, in the first quarter of 2023, revenue reached 255.8 billion VND, also decreased 34.5% over the same period in 2022.

The consumption of the paper and pulp industry is slowing down, while excess capacity has been posing many big challenges for businesses in the industry.

Export turnover of paper and paper products

All paper products such as printing paper, writing paper, uncoated packaging paper, tissue paper, and votive paper all had increased export output in the first 3 months of this year. This has contributed to helping the export turnover of paper and paper products in the first quarter reach a growth rate of 12.3% compared to the same period in 2022.

However, in April, export turnover suddenly dropped sharply, total paper exports of all kinds decreased by 14.8% over the same period last year, of which packaging paper decreased by 19.6%. Consumption demand decreased, while businesses still tried to maintain production and accepted increased inventory to keep workers. This situation is forecast to last until the end of 2023 and possibly longer.

Forecasting the situation of the paper and pulp industry in 2023-2024

It can be seen that 2023 is a difficult year for paper industry businesses with the impact of supply far exceeding demand while consumer demand is declining. Below are some paper industry forecasts in the coming period.

The pulp and paper industry faces many challenges in 2023

The paper industry is facing many challenges in 2023 when at the end of 2022 some businesses have to produce moderately. Regarding the issue of value-added tax refund, paper businesses are also facing barriers, because most of the raw materials are purchased from waste collectors, so it is difficult to prove the origin of the goods… From here, the cost will be affected. This is also a major barrier for pulp and paper industry enterprises in effectively controlling their company’s financial plans.

Besides, the import of chemical pulp raw materials is expected to face many difficulties due to strong fluctuations in exchange rates; The shortage of containers, freight charges and a number of other costs such as high costs of fuel, energy, materials and chemicals are also expected to have a negative impact on product prices.

According to the Pulp and Paper Association (VPPA), the paper industry is still facing major difficulties with reduced exports but factories still have to maintain operations to retain workers. This is a situation of excess labor resources, causing waste of costs for each business in the paper and pulp industry.

It is expected that the difficult situation of the paper industry will last until the end of this year and possibly longer because the world economic situation is in recession and demand is decreasing. The opportunity to recover will only come when the manufacturing industries begin to restore orders and will paper businesses have a chance to revive and “break out of the bottom”.

Forecast of packaging paper consumption and export

In 2023 – 2024, domestic and export demand for packaging paper is forecast to continue to grow, however future growth is predicted to be lower than in 2022 due to the impact of various unpredictable fluctuations as risk factors are considered being high:

• Industries that use a lot of packaging paper such as agricultural, forestry, and fishery products and processed industrial goods (textiles; footwear; wooden furniture; phones of all kinds and components; etc.) are expected to see export growth. Exports will remain low in 2023 due to the impact of inflation in export markets.
• Packaging paper export output to Vietnam’s main market is currently the Chinese market. 2023 has higher growth prospects than 2022 because China’s demand for packaging paper is forecast to increase sharply when the economy reopens.

In the long term, consumption of the packaging paper industry in the world and Asia is forecast to grow slightly. Reducing plastic waste is gradually becoming a popular trend worldwide, especially in large economies in the period 2022 – 2025 because of the sustainable, environmentally oriented trend of using paper packaging to replace plastic waste and plastic bags are growing in people from all ages, especially young people.