Many opportunities for Vietnam Plastics Industry from trade war

Many opportunities for Vietnam Plastics Industry from trade war

The trade war created many opportunities and challenges for the Vietnamese plastics industry and directly affected the steel industry. This is the sharing from representatives at the conference "Trade war: the future of manufacturing enterprises?" by the Saigon Economic Times in collaboration with Bluescope Steel Vietnam Co., Ltd.

Steel industry directly affected by the trade war

Vietnam steel industry is having difficulty when the decision of levying 25% tax on steel from all areas into the US was valid from May 2018. Meanwhile, large orders from the EU and US are looking for the Vietnamese plastic business, and plastic material prices have fallen by 20% over the beginning of the year.

Influenced by section 232 of the US 1962 Trade Extension Act, which allows the US President to impose restrictions on imports for national security reasons without the consent of the United States, in this trade war, steel was one of the fields affected directly. In particular, Donald Trump, The US President has decided to impose a 25% tax on steel and 10% on aluminum from all areas of the United States, which came into effect in May. Thus, Vietnam is one of the countries which is subject to this tax rate.

The problem with Vietnamese steel is that the US government has questioned and investigated some of Vietnam's color-coated steel products originating from China. Thus, Vietnam steel may be subject to imposing tariffs selling price of 150%.

However, there is a positive trend that FDI inflowing to Vietnam will increase the demand for factories, warehouses and real estate which leads to the prosperity of the steel industry in the country.

Opportunity for plastics industry in Vietnam

The US-China trade war created a challenge for domestic plastics manufacturers to serve the domestic market, but it brought benefits to consumers and workers as well as provided opportunities for exporters as plastics raw materials have declined. This is the opinion of Mr. Ho Duc Lam, President of Vietnam Plastic Association, Chairman of Rang Dong Plastic Board.

Ho Duc Lam, Chairman of Vietnam Plastics Association, said at the Conference

In addition, the import-export balance of plastics industry in Vietnam and China accounts for a small proportion. Vietnam exports the plastic product to the United States (ranked 17 in the United States) while the value of plastic goods, rubber of China has been imposed by the United States with tax in the period of 24/09/2018 about $ 10 billion. Thus, if China brings $ 10 billion in plastics and rubber to Vietnam, this will be a big challenge for domestic plastics manufacturers.

According to Ho Duc Lam, the wave of investment in China's plastics industry in Vietnam has taken place in the last 5-7 years in the form of FDI and FII, and this trend may continue to grow.

In addition, if Vietnam becomes the destination for Chinese plastics enterprises, a small proportion of Vietnamese plastics workers can benefit from higher wages as Chinese enterprises seek to recruit skilled workers. Moreover, domestic consumers can have the opportunity to access more cheap plastics products because Chinese enterprises will reduce prices to push inventory in the Chinese market.

However, the plastics industry in Vietnam can be negatively affected by having to compete directly with Chinese enterprises as they increase their investment in Vietnam's labeling to avoid tax breaks from the US side in both domestic and foreign markets.

On the other hand, opportunities for plastics industry have been presented as large orders from the US and EU are coming to Vietnam. Trade war has also led to a drop in plastic prices by over 20% from the beginning of the year.

According to Mr. Lam, to protect domestic enterprises, it is based on not only the efforts of enterprises but also the government needs to control the smuggling through the border; Import tax should be considered if there are signs of dumping and no investment licenses are issued if business registration certificates for production projects fail to secure more than two thirds of the production chain in Vietnam. It is also in need to promote new free trade agreements with Europe and other countries, which is also a way of mitigating risk when Vietnam's economy depends more on the US and China markets.

PLASTECH Vietnam, The International Exhibition & Conference on Machinery, Equipment, Technology and Materials of Plastics Industry anually held in Vietnam, is an ideal place for connecting, enhancing and expanding businesses. Please come to visit PLASTECH Vietnam 2019, which will take place from 26th – 28th June 2019 at Saigon Exhibition and Convention Center (SECC) in Ho Chi Minh City.