Since early in the second quarter of 2010, most paper producers in Vietnam have faced difficulties arising from increasing prices of inputs like electricity, water, chemicals, transportation fees and borrowing costs. Under these circumstances, paper producers are thinking of raising product prices.
At the end of March 2010, prices of scrolled printing papers stood at VND16.8-17.4 million per tonne. And in early April, large-scaled paper producers raised selling prices by VND1-1.2 million per tonne while smaller manufactures hiked prices VND600,000-800,000 per tonne.
Mr Vu Ngoc Bao, General Secretary of Vietnam Pulp and Paper Association (VPPA), attributed the higher prices of inputs to the volatility of foreign exchange rates. In addition to forex pressure, paper producers also have to pay more for utilities.
For instance, electricity and water prices climbed 7 percent and paper prices also rose nearly 1 percent as a result.
Into the bargain, the price of paper pulp is now at a record high. Long-fibre pulp price stayed at over US$900 per tonne, short-fibre pulp at US$850 per tonne and scrap paper at US$270 per tonne. The domestic used paper price climbed from VND3 million per tonne to VND3.7 million. As a result, many domestic paper producers decided to hike selling prices of printing paper, writing paper and newsprint paper.
Although domestic paper prices tend to accelerate at the moment, supply is limited for various reasons. Bai Bang Paper Plant, owned by the State-owned Vietnam Paper Corp, temporarily halted production for annual maintenance. The facility is in process of raising annual production capacity to 125,000 tonnes. Meanwhile, medium and small production facilities had to deal with pulp shortages. Thus, total paper production is forecast to continue dropping in 2010 as the supply cannot meet the demand, resulting in price hikes in the near future.
According to Vietpaper, Fibria - the largest BEK pulp producer in the world with total yearly capacity of 5.4 million tonnes - recently announced an increase in BEK pulp price, starting from May 1. With higher pulp prices, paper prices will surely rise in all markets, including Vietnam. After receiving the announcement, paper producers in Vietnam planned for another price hike. Tan Mai Paper Group Joint Stock Company revealed the plan to raise paper prices by 9-14 percent in early May.
However, according to Mr Vu Ngoc Bao, there was a paradox in current tax policies applied for waste paper. If tax policies are revised, Vietnam can reduce the trade deficit and send paper prices to more proper rates.
At present, 72 percent of raw materials used in the paper industry are waste paper. The rate of waste paper collected for recycling in Vietnam is 32 percent, about half the regional rate of 60-65 percent. According to the law, waste paper has zero import tax and paper enterprises only have to pay value-added tax (VAT).
In Vietnam, if sellers have VAT invoices, producers will enjoy tax discount. However, in case sellers do not have VAT invoices, waste paper purchasers have to pay income tax of 3 percent for sellers and pay VAT.
In fact, paper producers have to pay VAT of over VND800,000 per tonne on domestic waste paper. However, they have to pay only about VND202,000 of VAT per tonne for imported waste paper. At present, according to Mr Bao, the paper industry suffers from a trade deficit of US$1.5 billion. Hence, if the Government revises tax policies, paper producers will not only save money in collecting low-price waste paper, but also help reduce trade deficit.
Nonetheless, due to the increasing prices of paper pulp, oil, coal, electricity, water, chemicals, transportation costs and high forex rates, the domestic paper market will continue to heat up.
According to paper producers, price hikes are inevitable, although they will have to trim profits and struggle to reduce production costs. The problem is now how to avoid price shock to consumers and to compete with foreign rivals. (VNE)
Vietnamese
