Input prices on the decline

Monday, Aug 10, 2015 08:00

A production line of plastic pipes at Tien Phong Plastic Joint Stock Company in Hai Phong City. Plastic producers are enjoying higher profits thanks to falling costs of raw materials. — VNA/VNS Photo Hoang Hung

HCM CITY (Biz Hub) — The sharp decrease in prices of several kinds of raw materials has encouraged domestic companies to expand production activities, according to a source from Thoi Bao Kinh Te Sai Gon (Saigon Economics Times).

Since late last year, the price of iron, copper and plastics in the world market has declined significantly.

The price decline has helped domestic enterprises to reap high profits, particularly those involved in the plastics industry, such as Tien Phong Plastics Joint Stock Company (NTP), Tan Tien Plastic Package Company, Binh Minh Plastics Joint Stock Company (BMP), and Rang Dong Plastics Joint Stock Company.

BMP vice chairman and general director Nguyen Hoang Ngan said the price of plastic raw materials had decreased since late last year, with a sharp fall in the early months of the year.

The prices of plastic raw materials were slashed by between 16 and 17 per cent compared with last year's average rates.

"The sharp price decline was a good opportunity for plastics companies to increase profits since costs for raw materials account for 60-70 per cent of product manufacturing costs," Ngan said.

He said last year the company's pre-tax profits had reached VND 481 billion($22.6 million), which was the company's target set for this year.

"However, so far this year the company has made profits that represent over 72 per cent of the yearly plan," Ngan said.

The BMP general director said that thanks to high profits the company had decided to invest more in upgrading production technology and equipment with total cost of VND 200 billion (US$9.17 million), and building new factories.

In April, the company put its fourth factory, with the value of VND175 billion (US$8.27 million), into operation in the southern province of Long An.

In the second quarter of the year, the Tan Tien Plastic Package Company (TTP) reported that it would earn VND16 billion, six times higher than the figure compared to the corresponding period.

The company plans to inject 2 million euros and US $1.24 million to renew equipment and machinery to meet market demand.

As for the NTP, its after-tax profit was VND170 billion, a year-on-year increase of 13 per cent, for the six months of the year.

The Rang Dong Plastics Joint-Stock Company also said that it generated VND13.5 billion in the first quarter of the year, up 192 per cent compared with the figure recorded in the same period last year.

Company leaders attributed the high profits to a decrease in the prices of raw materials and effective control of manufacturing costs.

Plastics companies were not the only businesses benefiting from the lower prices of raw materials, as steel companies also enjoyed advantages.

According to the Viet Nam Steel Association, the price of iron ore 62 per cent Fe in the world market dropped from $100 per tonne in April and May to only $66 in June and July, the lowest level in the last 20 months.

Other materials such as steel ingot, hot rolled steel plates and flat steel also saw significant declines compared with the figures late last year.

Early this year, the price of imported hot-rolled steel coils was US$500 per tonne. It is now $350.

In spite of benefiting from the decline in raw material prices, steel companies involved in the plastic industry did not make as much profit as plastic manufacturers.

A representative of a steel company in Ba Ria-Vung Tau Province said that steel companies' profits had been affected by other input costs, including higher electricity and transport fees.

Domestic steel companies' 10-20 per cent reduction in the prices of finished steel products also limited their profits, he said. — VNS

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