Vietnam Plastics Industry to See Strong Growth

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HANOI – Over the past two years, plastics companies have been disappointed by the slowing Vietnamese economy. But now, due to global companies looking for cheaper alternatives to China, the economy is showing strong signs of bouncing back.

As the Chinese economy continues its transformation from an economy based on export-manufacturing to a consumer driven model, production facilities elsewhere in Asia, which can provide lower labor costs and tax overheads, will emerge to take up the challenge. China’s Free Trade Agreement with ASEAN dictates that the main beneficiaries of this change will be Vietnam, Indonesia, Malaysia, Philippines and Thailand.

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In particular, cheaper borrowing costs and more investment in Vietnam from multinational manufacturers is driving strong growth in the country’s plastics industry.

The plastic manufacturing industry is one of the fastest growing industries in Vietnam, sustaining an average annual growth of 20 percent to 25 percent. The majority of these plastic products are made for export. The most common products made include packaging, household products, construction and engineering plastics.

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Despite a somewhat weak economy, Vietnam exported US$1.8 billion of plastic products in 2013, compared with US$800 million in 2007. The Vietnam Plastic Association has projected an export growth of more than 13 percent for 2014. Over the past three months alone, plastics exports have experienced a year-on-year rise of 19 percent to approximately US$485 million.

The largest importers of Vietnam’s plastic products over the last three months were:

  • Japan US$121 million (25 percent of Vietnam’s total plastics exports);
  • United States US$58 million;
  • Germany US$27 million;
  • The Netherlands US$25.4 million; and
  • The United Kingdom US$25.2 million.

Truong Thinh Plastics is Vietnam’s largest maker of plastic tubes for cosmetics and personal care. Jay Tran, executive VP of the company, believes his company is getting more opportunities to produce plastic products due to costs increasing in China, a trend that has been happening for a few years now. They are increasingly receiving more international orders, especially from the United States and well-established brands.

One of the potential long-term advantages for Vietnam’s plastic products comes from the growth seen in its domestic market. With a total population of 90 million, the country’s already sizable middle class is continuing to see strong growth. A recent study from the Boston Consulting Group shows that Vietnam’s middle-income segment will triple to 33 million people by 2020.

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The Vietnam Plastics Association estimates that the country’s per capita consumption of plastics will grow from 30 kilograms in 2012 to 55 kilograms by 2015. In 2012, the world average was 37 kilograms, with the U.S. and EU having an average of more than 120 kilograms per capita consumption.

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