Challenges for masterbatch manufacturing and packaging industry in Vietnam

Does masterbatch manufacturing industry grow in the past few years? How does this masterbatch manufacturing development affect the packaging industry in Vietnam? What masterbatch producers can do in the purpose of dealing with the happening problems and improving this situation?

The game on masterbatch manufacturing industry is ruled by foreign companies

With an average growth rate at an average of 15% – 20% per year, plastic packaging industry in Vietnam is considered an attractive industry and has a lot of potential for development. However, in recent years, domestic enterprises hardly occupied much in that growth. Over the past few years, many Vietnamese packaging manufacturers have been under the pressure of which these companies were bought by foreign consortiums. At the present some well-known enterprises belongs to Japanese investment organizations while others sell 80% of shares to Thai or Korean corporations

The masterbatch manufacturing industry in Vietnam has various potential to grow up

Accordingly to the report on Vietnamese plastic packaging marketing which was recently published by StoxPlus, it was shown that the fundamental problem in Vietnam’s plastic packaging industry is the shortage in raw material resources supplied by domestic masterbatch manufacturing companies, leading to a reliance on imported materials. Specifically, the upcoming plastic industry is predicted to require an amount of 8.2 million tons of primary plastic per year.

The expansion of packaging sector greatly influence the masterbatch manufacturing

Regarding to the factors contributing the development of Vietnam’s plastic industry, it can not be excluded the contribution of the packaging sector which is dominated by 14 leading masterbatch manufacturing producers with 53.9% market share in 2016. The market size of this industry in 2017 reached nearly one billion USD, which increased up to 6.6% compared to the same period in 2016. With the current situation of increasing material prices, it is expected that plastic packaging industry will need more effort to overcome these challenges.

Challenges that masterbatch manufacturing and plastic packaging industry are currently facing

Considering all aspects, from the conditions of production and business to competing capability, foreign enterprises have also shown superiority over domestic competitors. Meanwhile domestic manufacturers, especially small and medium-sized companies, are exhausted when they are under dual pressure: both competing with foreign enterprises and being dependent on imported raw materials, techniques and machines.

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Lacking of input materials is an extreme worry of masterbatch manufacturing companies

From the beginning of 2017 until now, masterbatch plastic packaging manufacturers are facing a huge concern about input materials. Despite the production capacity is projected to increase in the period of 2019 and 2021, Vietnamese packaging manufacturers still face the primary plastic importing issues due to the increasing in demand of the domestic plastic industry. Domestic plastic production is forecasted to be able to supply 2.34 million tons, accounting for approximately only 30% of total Vietnamese market demand by 2023.

In particular, PP plastic is subjected into a new import tax of up to 3%. PP resin is the main raw material of thousands of plastic packaging enterprises today. The thing here is while the demand on using this kind of material is extremely high, domestic companies are not able to offer the amount that whole market requires. Masterbatch manufacturing producerhas to import 80% the required volume. Therefore, the application of new import tariffs has a direct impact on final product prices, and indirectly on the competitiveness of Vietnamese businesses in the relation to the foreign enterprises.

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Does masterbatch manufacturing have any advantages in this situation?

The advantage for the above direction in this period probably came from the fact that the euro currency has the exchange rate equal to the USD currency, creating great opportunities for businesses who determined to invest seriously in the new technology. Several masterbatch manufacturing companies shared the ideal in which they planned to import machinery from European countries like Germany and France this year to enlist the golden time with the purpose of saving costs for the investment in production equipment.

>>Read more: Summarize masterbatch production in Vietnam and in global market

Improvements that masterbatch manufacturing companies need to consider and apply

According to analysts, in order to maintain the market share as well as to increase export capacity to new markets, manufacturing enterprises need to constantly develop their production scale in both width and depth by improving technology, innovating machinery and equipment.

The Vietnamese packaging industry is expected to face many technological challenges since customers’ requirements for manufacturers become increasingly demanding. In the present, packaging generated from plastic are required to be light in weight, friendly to the environment, with gorgeous designs. In addition, finding an alternative material replacing a part of primary PP plastic in production procedure is also another solution that businesses are giving faith in. In the current plastic industry, some masterbatch manufacturing businesses such as European Plastics (EuP) are producing and supplying plastic filler masterbatch (taical), this additive can help various plastic-based product manufacturers, especially packaging producers, partly replace the original imported PP resin. This will contribute to reducing the concerns of packaging and plastic film producers in the pressure of imported materials.

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