Plastic masterbatch industry in Vietnam is being evaluated as a potential industry with stable growth of 16% – 18% during the last 5 years. So what are the advantages and disadvantages that plastic masterbatch manufacturers are currently facing? How to deal with these problems and take benefits on what they already have?
Do the trade agreements cause impacts on plastic masterbatch manufacturing in Vietnam?
By participating in bilateral and multilateral trade liberalization (FTA) agreements, especially new generation FTAs, in the near future, Vietnamese plastic masterbatch enterprises will be benefited from tariff preferences. Masterbatch manufacturer now have various opportunities to innovate and upgrade new technology, to increase their production scale in the response to the wave of investment and joint ventures with foreign countries, to penetrate and expand their current markets.
How the US-China trade war affects Vietnamese plastic masterbatch industry?
The US-China trade war can create challenges for domestic plastic producers to serve the domestic market, but also benefits consumers and workers. Along with that, plastic manufacturers are given many opportunities to produce plastic masterbatch for exporting thanks to the reduced raw material prices. On the other hand, opportunities for companies in the plastics industry are also enhanced when large orders from the US and EU are coming to Vietnam (multinational retail corporation such as Walmart or Target are shifting their orders to Vietnam). The trade war also caused the price of input materials of plastic industry to fall more than 20% compared to the beginning of the year.
Various opportunities have been opened for Vietnamese plastic masterbatch producers
According to the Vietnam Plastics Association, in the next few years, domestic enterprises still prioritize their investment in exporting packaging because these products are suitable with their production capabilities. The two potential markets which are most targeted at the present are European and American markets. In these two markets, the turnover of exported Vietnamese plastic masterbatch only accounts for 2% of the market share and is benefited the preferential tax rate of 0%. Meanwhile, products of the same type imported from other countries are being subjected to high tax rates of 10% – 30%.
On the other hand, when being imported to the foreign markets, products of Vietnamese masterbatch manufacturer do not have to compete with domestic products because local enterprises does not have advantages in offering a competitive price due to high labor costs. Beside European and American governments also tend to encourage importing the final products from other countries.
Difficulties and challenges with domestic plastic enterprises
According to experts in this plastic masterbatch industry, the potential of the domestic market is also very large. The average plastic consumption per Vietnamese person is about 55kg / year and this number experienced an increase by 14% per year. Despite the positive trend in growth rate, in general, plastic companies still face many difficulties and challenges, especially since 2016 when the non-tariff barriers are removed, the pressure on domestic enterprises is even greater.
Comparison between plastic masterbatch manufacturers in Vietnam and other countries
Meanwhile, the plastics industry in some other countries in the ASEAN region has a higher level of production. For example, Thailand masterbatch manufacturer is getting towards on producing biotech plastic products which are friendly with the environment while Malaysia has the ambitious in becoming the top polyethylene film supplier.
Regarding to the competitive perspective, plastic masterbatch businesses are still the underdogs because domestic materials resources only meet about 30% of demand, which means the remaining 70% is dependent on imports. Besides, the variation of plastic products’ models and types is also limited, there are not many products with added value.
Vietnamese plastic masterbatch companies and proper solutions they should considered
The plastic industry enterprises said that the demand on budget for investment in production is very large, so it is necessary to have an effective financial solution to meet these practical needs with the purpose of expanding the production and being independent with input materials suppliers. In addition, to create a competitive advantage with foreign companies in the domestic market, Vietnamese plastic masterbatch manufacturers need a restructuration in which the plastic proportion of plastic packaging and household plastic products groups is shifted towards the reduction meanwhile the proportion of plastic construction materials and engineering plastics is gradually increased.