PPI Magazine

Future paper investment trends in Vietnam

By Vu Ngoc Bao Wed, Mar 17, 2010

Vietnam, March 18, 2010 (RISI) -Thanks to the government's investment promotion policies for non-state enterprises to invest in producing and trading, the paper industry has witnessed robust growth in the past 25 years (1986-2009) in Vietnam. In 1986, the total capacity of the Vietnamese paper industry was only 88,703 tonnes (with 37,665 tonnes of printing/writing paper). In 2009, it was 1,133,831 tonnes (with 262,500 tonnes being printing/writing paper), showing a 13-fold increase compared to 1986, with an average annual increase of 11.7%.

Currently, most of the tissue and packaging paper machines and some of the paper machines for printing/writing paper are small and they are made in China.

The total capacity in 2009 of fourdrinier paper machines is 841,000 tonnes/yr. There are only 13 fourdrinier paper machines with a capacity of 45,000 tonnes/yr or more. (The biggest one is 220,000 tonnes/yr). Among them, there are only seven machines made in Europe (run with full capacity). Five of them have just started up in the middle and the end of 2009, with a total capacity of 415,000 tonnes/yr.

Also, two thirds of the paper/board in 2009 is produced by small sized mills with backward technology. Since the end of 2005, it has been clear that the quality of paper produced in these mills is poorer than what the markets required. The need to replace all from the ground up seemed to be more and more urgent from 2006.

In the past 3 years, there is a trend to replace all the old lines by new larger and more modern ones. All these new paper machines are made in China with a capacity of 30,000 tonnes and above. They are fourdrinier ones with a normal design speed 250 m/min. Stock preparation equipment is also mostly made in China, except for two lines supplied by Andritz (total capacity is 50,000 tonnes/year).

Studying these lines, it can be seen that investment rate per unit capacity is paid most attention by investors, rather than efficiency in the consumption of raw materials, energy and water. As the quality of paper that was produced (end of 2009 to the beginning of 2010) by such paper machines is only a little better than paper made by the old ones, they cannot compete with imported paper due to limited quality and high price.

In mid 2009, Vina Kraft Paper started commercial production. Its paper has high quality and can absolutely replace imported paper, which is sold at a 1.5-times higher price compared to Vietnamese products. In 2010, Vina Kraft will produce and consume 180,000 tonnes (at 82% capacity) for the contracts signed in 2009. It intends to install a second paper machine.

So, it is clear that two different ways of investment bring two different results. It can help Vietnamese enterprises to have a new point of view about investment in the near future.

Most people think that Vina Kraft is the best model that Vietnamese Investors should follow. To implement the projects quickly, it is necessary for the investors to have enough finance for each phase; well-experienced consultants, Engineering, Procurement and Construction (EPC) with ability and experience in doing business in Vietnam; hiring a suitable board of management and operators for the production line.

In order to have efficient finance as mentioned above, the Vietnamese enterprises need to join together to make one big project, instead of individual small ones.

I am confident to say that in the next few years, leading companies in the world such as ABB, Allimand, Andritz, Marubeni, Metso, Pöyry, Siemens, Voith...will contribute actively to the development of Vietnam's paper industry.



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