Despite the strong development in recent years, Vietnam's plastic industry has not been fully active in the source of raw materials for production.
High growth rate
The plastic industry in general is still young compared to other well-established industries like the chemical and textile industries. However, it has experienced strong development in recent years. From 2010 to 2021, this is one of the fasting growing industries in Vietnam with an annual growth rate of 12% - 18%.
Currently, plastic products from Vietnam are present in nearly 160 countries. Major export markets of Vietnamese plastic companies are Japan, the US, some European countries (Germany, the Netherlands...), ASEAN (Cambodia, Indonesia, the Philippines), and Korea. Total export value of Vietnam's plastic products reached USD4.62 billion in 2021.
Vietnamese people have a habit of using a lot of plastic products in daily life, especially plastic packaging. Stable economic growth (high compared to the world average) and increasing per capita income will be the main drivers for Vietnam’s plastic industry. Besides, the free trade agreements that Vietnam has signed are also positive factors that help Vietnamese plastic products increase their competitiveness in the global market.
Types of Vietnamese plastic products
Currently, Vietnam's plastic products are divided into 4 main groups, including packaging plastics, household plastics, construction plastics, and high-tech plastics.
This is a product line with low added value, however, it accounts for 39% of production value and the largest proportion in the export structure of Vietnam's plastic products.
The good growth in the domestic consumer goods industry is a key factor to help the packaging plastic segment ensure a solid output. Packaging plastics is related to two industries: Plastic and Packaging. The plastic packaging industry can be classified into soft packaging, mainly serving the food industry; canned plastic bottles, mainly serving the beverage sector; and hard packaging.
According to a report by the Vietnam Plastics Association (VPA), plastic packaging accounts for 460 out of 2,000 plastic companies nationwide, contributing 66% to Vietnam's annual plastic export value.
Packaging plastic is also the main export plastic product of Vietnam's plastic industry. Despite having the advantages of low production costs, the export market for plastic bags and packaging is facing some difficulties. However, such obstacles do not heavily affect domestic plastic packaging enterprises.
This segment accounts for 14% of production value. The major products are water pipes, door and window frames. Thanks to the recovery in the real estate industry, Vietnam’s market for plastic construction materials is expected to expand strongly with high potential.
The factors promoting the development of the plastic building materials segment include:
The recovery of the real estate market and large-scale infrastructure projects;
The bulky size of plastic products makes them difficult to transport, so imported products are less competitive;
According to the Development Plan of Vietnam's plastic industry for 2020, with a vision for 2025, the plastic industry will be restructured by gradually reducing the proportion of packaging and household plastic products and increasing the proportion of construction & engineering plastic products.
Household plastic products account for about 32% of production value, including furniture, cabinets, plates, toys, and shoes. Domestic companies mainly focus on the production of this product line. However, this product often produces low-profit margins.
In recent years, Vietnamese household plastic products account for 90% of the domestic market share, focusing on the mid-end segment. However, domestic companies are underestimating the domestic demand for high-end consumer goods and have no plans to develop high-end product lines. As a result, the high-end household plastic segment is dominated by foreign companies with methodical strategies. They have invested in a modern distribution system and diversified products to meet the needs of consumers.
This segment accounts for 9% of production value. High-tech plastic products include plastic parts used in assembling cars, motorcycles, medical equipment, and equipment used in the composite industry.
Currently, there are more than 2,000 plastic companies in Vietnam mainly located in Ho Chi Minh City (84%). Domestic plastic companies account for 85% while foreign ones account for only 15% in number but 40% in investment capital.
The government has planned to divest many domestic plastic companies, and it is expected that many foreign investors will take advantage of this opportunity to buy a large percentage of shares offered for sale, thereby increasing their capital contribution ratio in the market to about 60%.
Source: Ministry of Industry and Trade