Falling plastic granule prices improve firms's profitability
A BMP's plastic factory. BMP closed the October 11 session at VNĐ54,500 per share. Photo diendandoanhnghiep.vn |
HÀ NỘI — Plastic granule prices are expected to fall in the short term, a favourable circumstance that would drive plastic producers towards better profitability.
Vietcombank Securities Company Ltd (VCBS) forecast that Polyvinyl Chloride (PVC), an input material for plastic production, would remain at low prices towards year-end and into 2023 on rising global supply.
Its forecast prices of between US$800 to $1000 per tonne are projected to significantly improve domestic plastic firms' profit margins.
Specifically, giant PVC suppliers in China, India and the US have begun to expand their production to boost PVC output to 70 million tonnes per year by 2026.
The abundant supply is fuelled by the falling consumption of PVC in China, which a PVC-consumed realty sector in decline has caused. VSBC forecast that the weak demand would hold steady until late 2023 since not many new projects in the country would get underway.
According to Fitch Solutions, PVC prices correlate strongly with coke prices because a major portion of global PVC supply comes from China. As coke is projected to drop to $280 per tonne in 2023, China would have more room to reduce PVC prices to a level comparable to those in the US and EU.
Good news also comes from the demand side. In the first half of 2022, the number of apartments under construction in the North of Việt Nam grew steadily, lifting domestic demand for plastic pipes.
VCBS forecast that the demand would remain high in the coming years as the country still has ample room for urbanisation, and many legal obstacles to realty projects are expected to be removed in 2023. As a result, VCBS estimated the growth rate of the building plastic industry at around 7-10 per cent on the horizon.
The plastic industry comprises two main sub-industries: plastic pipes and building plastic materials.
In the former, Bình Minh Plastics JSC (HOSE: BMP), Tiền Phong Plastic JSC (HNX: NTP), Hoa Sen Group (HOSE: HSG) and Tân Á Đại Thành Group JSC take up 90 per cent of the market shares.
Meanwhile, the latter is more fragmented and faces stiff competition from China. Đông Á Plastic JSC (HOSE: DAG) is a large producer in the sub-industry, holding roughly 20 per cent of the market shares.
Việt Nam is highly dependent on imported PVC because the only two producers in the country, AGC Chemicals Vietnam Company Ltd and TPC VINA Plastic & Chemical Corp Ltd, crank out 390,000 tonnes of the thermoplastic annually, about 700,000 tonnes short of domestic demand.
As PVC contributes to 70 per cent of the costs of gold sold (COGS) incurred by building plastic firms, their profit margins are closely linked to global PVC prices, which, in turn, come under the influence of PVC supply-demand in China and the US. The two countries control 50 per cent of the global PVC market.
Undoubtedly, PVC prices falling to $950 per tonne in the first half of 2022 were caused predominantly by the falling demand in China and the recovery of PVC production in the US.
VCBS believed the falling prices of plastic granules would improve BMP's and NTP's profitability in the second half of 2022 and 2023. Their better financial performance would act as a catalyst for their bullish stocks in the short term.
Their research and development on new plastic pipes, such as HDPE and PPR pipes, would further improve their earnings, adding to the optimistic outlook. — VNS
Related News
EU firms’ confidence in Vietnam increases again: EuroCham
15:36 | 09/10/2023 Import-Export
Bankers propose resolution to support firms, people
15:16 | 21/07/2023 Finance
Vietnamese food firms attend China’s SIAL Shanghai 2023
15:27 | 19/05/2023 Import-Export
Practical incentives needed to help firms adopt green practices: official
17:50 | 14/05/2023 Headlines
Latest News
Take advantage of opportunities from American "eagles"
14:59 | 10/05/2024 Import-Export
Ho Chi Minh City: Enterprises overcome difficulties, exports lead the country
14:58 | 10/05/2024 Import-Export
Strong recovery seen in industrial production in four months
14:52 | 10/05/2024 Import-Export
"The key" to promote growth for businesses
10:23 | 10/05/2024 Import-Export
More News
An Giang Province to turn textile-garment, footwear into key export items
14:48 | 09/05/2024 Import-Export
“Hopeful stars" for businesses on the new journey
09:51 | 09/05/2024 Import-Export
Vietnam remains attractive destinations for Japanese IT firms
15:42 | 08/05/2024 Import-Export
Pepper exports decrease in volume, increase in value
15:38 | 08/05/2024 Import-Export
Open credit flow to support import and export
09:30 | 08/05/2024 Import-Export
Import turnover increases by US$13.5 billion
09:30 | 08/05/2024 Import-Export
Green production, trade will help wood industry increase export: Viforest
14:30 | 07/05/2024 Import-Export
Hanoi attracts over 1.1 billion USD in FDI in four months
14:28 | 07/05/2024 Import-Export
FDI flows strongly into manufacturing, real estate
14:26 | 07/05/2024 Import-Export
Your care
Take advantage of opportunities from American "eagles"
14:59 | 10/05/2024 Import-Export
Ho Chi Minh City: Enterprises overcome difficulties, exports lead the country
14:58 | 10/05/2024 Import-Export
Strong recovery seen in industrial production in four months
14:52 | 10/05/2024 Import-Export
"The key" to promote growth for businesses
10:23 | 10/05/2024 Import-Export
An Giang Province to turn textile-garment, footwear into key export items
14:48 | 09/05/2024 Import-Export