Southeast Asia packaging paper production capacity continues to grow in the future

China Customs data show that Vietnam and Indonesia exported a total of more than 780,000 tons of box board corrugated paper to China in 2018, an increase of 243%, accounting for 31.7% of China's box board corrugated paper imports that year, and the vast majority of import growth comes from corrugated paper. At the same time as the increase in exports to China, the investment enthusiasm of box board corrugated paper projects in Southeast Asian countries is high.

According to Philippine media reports recently, the Philippines United Pulp and Paper (UPPC) will invest 8.5 billion Philippine pesos (about 165 million US dollars) to build a new corrugated paper machine with an annual capacity of 220,000 tons, which is scheduled to be put into production in November 2020.

The project was approved by the Philippine Board of Investments on April 16. The project will be located in Calumpit, Bulacan province, and the products, in addition to local consumption, are also planned to be exported to overseas markets.

UPPC was established in 1969 and is currently a subsidiary of SCG Thailand. According to Fastmarkets RISI data, UPPC currently has two paper machines in Calumpit, with a combined capacity of about 230,000 tons of corrugated paper per year.

The machine is just one of many new projects for box board corrugated paper in Southeast Asia. According to incomplete statistics, the new production capacity of wrapping paper and recycled pulp announced by China's main wrapping paper enterprises in Malaysia and Laos has reached 6-7 million tons/year, but local paper enterprises in Southeast Asia and investors from other countries and regions are also increasing investment in Southeast Asian countries.

In Malaysia, GS Paperboard & Packaging (GSPP) will build a new 1,445 mt/d box board corrugated machine, which is expected to start production in 2021. Valmet will provide an OptiConcept M box board production line, including an automated system and winder, with a 7.25m width and a design speed of 1,200 m/min, producing 70-180 g/m2 box board corrugated paper products.

GSPP, located in Selangor, Malaysia, is a subsidiary of the Japanese Prince Group and currently has a box board corrugated paper production capacity of about 300,000 tons/year.

In Vietnam, Japan's Marubeni Co., Ltd. announced in January this year a new 350,000 tons/year box of corrugated paper project in Vietnam's Bati - Vtau province, which is expected to be put into production in the second half of 2020 fiscal year.

Taiwan media reported that Taiwan paper company Zhenglong also plans to add a No. 2 paper machine in Vietnam's Binh Duong Paper mill, with an annual output of 400,000 tons of board paper, which is expected to be put into production in 2021.

In addition, it is understood that since the beginning of this year, Vietnam's local paper enterprises have also been put into production of box board corrugated paper machines, a total of about 500,000 tons of new production capacity/year.

In Indonesia, a printing and writing paper machine of a subsidiary of PT Fajar Surya Wisesa Tbk (hereinafter referred to as Fajar), a major local paper company, will be transformed to produce corrugated paper this year, with an estimated annual capacity of 230,000 tons.

According to Fastmarkets RISI, the APP also plans to retrofit three paper machines in Indonesia and convert them to wrapping paper. The three paper machines have a combined production capacity of about 850,000 tons/year of cultural paper.

Rapid market development

In addition to the impact of China's waste paper import policy, the capacity expansion of the wrapping paper and paperboard industry in Southeast Asia in recent years has benefited from economic growth, especially the development of processing manufacturing and fast-moving consumer goods industries, as well as the rise of e-commerce has greatly driven the demand for packaging.

Vietnam's economic growth hit a 10-year high of 7.08% in 2018, and the Asian Development Bank's recently released Asian Development Outlook 2019 predicts that Vietnam's economic growth will reach 6.8% this year and 6.7% next year.

Announcing the new investment in Vietnam, Marubeni said demand for box board corrugated paper in Vietnam would grow by more than 10 per cent a year, outpacing Thailand, Indonesia and other countries. In addition, benefiting from stable economic growth brought about by a large number of foreign investment export industries, Vietnam is expected to become the largest consumer of box board corrugated paper in ASEAN in the first half of 2020.

In its 2018 annual results report, Fajar also said that Indonesia's consumer goods industry has attracted a lot of investment in recent years, and the food and beverage retail industry maintained a healthy development in 2018, which has brought consumer demand for wrapping paper and cardboard.

It is worth mentioning that, due to the reduction in the amount of waste paper imported from China, Fajar increased the export of wrapping paper to the Chinese market in 2018. According to the company's 2018 financial report, Fajar export sales accounted for 27% of the company's total sales, compared to 16% in 2017.