CHENG LOONG BINH DUONG CONTAINER CO INSTALLS NEW 1.8M CORRUGATOR

A NEW BHS CORRUGATED LINE FOR LEADING VIETNAMESE PLAYER.

A REPORT BY DAVID HAYES

VIETNAMESE INVESTMENT

INTERNATIONAL PAPER BOARD INDUSTRY 43

V ietnam’s corrugated industry has experienced rapid growth during the past four years, with an estimated 80 or more corrugators

having been installed during this time, doubling the number of corrugators in operation countrywide. Most foreign-owned corrugated factories have expanded their production capacity in recent years to meet growing demand for packaging, as more multinational companies set up export manufacturing operations in Vietnam. Over the same period, a growing number of domestic companies, many of them small and medium sized enterprises, have entered the corrugated industry, attracted by increased use of basic paper packaging at the more price sensitive end of the market.

According to industry estimates, most new corrugators have been installed in southern Vietnam, the country’s economic centre, where about 150 machines are now estimated to be in operation. Many of the lines installed recently are imported second hand machines, purchased by Vietnamese companies entering the corrugated industry for the first time. Domestic companies generally install smaller 1.6 and 1.8m lines, many of them buying reconditioned machinery that is imported from China.

Foreign-invested corrugated companies are also expanding in number, with several having set up factories in Hanoi to supply the growing packaging market in northern Vietnam after initially setting up their first Vietnamese plants in the south in Ho Chi Minh City. Cheng Loong of Taiwan has become the latest foreign packaging company to install a new corrugator in Vietnam, where the company operates two corrugated plants near Ho Chi Minh City, supplying customers in the fast developing southern region. Earlier in 2015, Cheng Loong started up a new 1.8m BHS Corrugated machine at its Binh Duong plant, located 40km north of Ho Chi Minh City in Binh Duong Province, where the factory’s original 2.5m corrugator has been in operation since the plant opened in October 2009. Cheng Loong’s new BHS Corrugated machine has increased the plant’s board production capacity to 15,000 sqm per month. Of this, some 10 million sqm of board is converted in-house each year, while corrugated sheets, about 5 million sqm, are sold each month to other sheet plants.

“The capacity of our new No 2 line is 6 million sqm per month and the No 1 line produces about 9 million sqm a month. About 90 per cent of our capacity is

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44 INTERNATIONAL PAPER BOARD INDUSTRY

in use,” said Chad Wang, General Director of Cheng Loong Binh Duong Container Co Ltd. “We had reached almost 10 million sqm production, so we wanted a new corrugator to aid our growth and expansion. We chose a new 1.8m corrugator from BHS Corrugated due to our experience working with them for so many years.”

Needed space Installing the new corrugator involved extending the Binh Duong

plant to accommodate the new machine and to create additional storage space for paper rolls along with finished sheet board and finished boxes. “We expanded our factory by 10,000 sqm, specifically for the new corrugator and we also added a further 5,000 sqm of warehouse space. It took about six months to build the new factory and warehouse space,” Mr Wang said.

Cheng Loong’s new corrugator is designed to produce sheets up to 1800 x 4000mm in size, running B,

C and E flute, as well as CB and CE doublewall. “The maximum running speed of our new machine is 250m per min,” Mr Wang explains. “The average speed we operate the machine at is 190m per min, as many orders are small.”

Mr Wang noted that the Binh Duong plant’s original 2.5m BHS Corrugated machine is also designed for a maximum operating speed of 250m per min, running sheets up to 2500 x 4500mm in size, in B, C and E flute, as well as AB, CB and BE doublewall. “We use AB, EA, CB and CE flute for double wall board and C, B and E flute for single wall board. We can change flutes very quickly,” Mr Wang said. “Each day, we do one flute change on average for each line. Our new machine is very much for short orders.”

Diverse customersMr Wang explained that doublewall, such as AB, is used to make transit outers, packaging for automotive spare parts and boxes for chemicals and electronics products. They use BE doublewall to produce boxes to pack seafood for export. “C flute is used for footwear, furniture and garment outer boxes, while B flute is for seafood inner cartons, food and beverage products and electronic parts,” Mr Wang explained. “Seafood is for export. This includes all kinds of products including shrimp and fish. The seafood export business is stable. E flute single wall board is for footwear inner boxes. A flute is a special specification. In Taiwan and Japan, C flute is not really used, just

“WE CHOSE A NEW 1.8M CORRUGATOR FROM BHS CORRUGATED DUE TO OUR EXPERIENCE WORKING WITH THEM FOR SO MANY YEARS.”

CHAD WANG

VIETNAMESE INVESTMENT

46 INTERNATIONAL PAPER BOARD INDUSTRY

A flute; so Taiwanese and Japanese customers in Vietnam order A flute boxes from us here as well.”

Cheng Loong installed the second corrugator in its Binh Duong plant to meet the growing demand for corrugated as Vietnam’s export orientated manufacturing sector continues to expand as more foreign companies open plants in the country’s southern region. “Business is growing. Customers want to buy good quality packaging and expect excellent service and our company is good for that,” Mr Wang said. “Footwear boxes are 40 per cent of our business and growing in Vietnam. Nike, Adidas, Puma, New Balance and most other major international brands have factories in Vietnam and they are expanding their production lines. Japanese footwear brands have also started moving production to Vietnam this year because of the lower labour costs. Some Japanese companies are moving their production lines from China to Vietnam, because labour costs are getting higher in China.”

Household chemical producers provide the second largest market for the Cheng Loong Binh Duong plant’s boxes, especially detergent products. “Household chemicals and detergents are over 10 per cent of our business and it is increasing,” Mr Wang said. “Detergent use is increasing as the quality of living is rising. In the past four years, peoples’ incomes have more than doubled. Our factory labour costs are also increasing every year. It’s the same in China where labour costs have also increased,” continues Mr Wang.

Consumer electronics and electrical home appliances are the third largest market for the company’s boxes. These include digital TVs, refrigerators and washing machines.

“We make packaging for local electronics and household appliance factories for TV sets and electrical products. They supply the local market and export

“FOOTWEAR BOXES ARE 40 PER CENT OF OUR BUSINESS AND GROWING IN VIETNAM.”CHAD WANG

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48 INTERNATIONAL PAPER BOARD INDUSTRY

too,” Mr Wang said. “Demand for beverage boxes is also increasing, particularly for beer, soft drinks and some sweetened drinks. Beer is mostly in cans and soft drinks are in PET bottles. The beverage market is growing every year as the population here is now over 90 million people.”

Extensive convertingIn addition to two corrugators, the Cheng Loong Binh Duong plant is equipped with four flexo printing machines. These consist of a six-colour Sunrise 1227 flexo printer slotter, a five-colour Sunrise 1227 flexo printer, a five-colour Sunrise 925 flexo folder gluer and a four-colour Dong Fang Apstar printer slotter. Other equipment includes a Li Shenq LS1450 die-cutter and three Li Shenq LS1650S die-cutters.

“We installed the six-colour Sunrise flexo printer just over a year ago. We chose the six-colour model as beverage customers need six-colour printed packaging,” Mr Wang explained. “In Vietnam,

people like things to be colourful. In Taiwan and China, two or three colour boxes are OK, but in Vietnam and Thailand they want five or six colour boxes.”

Cheng Loong is considering installing another flexo printer to handle the higher volume of boxes being produced since the Binh Duong plant’s second corrugator was installed in 2015. “We want one more flexo machine, maybe a four or five colour model,” Mr Wang said. “We need it because of the growth in the market.”

Good growthConsumption of corrugated board is expected to reach an estimated 1.1 billion sqm pa in Vietnam this year, with demand for corrugated packaging growing at a strong single digit rate at present.

“The corrugated consumption growth-rate is almost the same as Vietnam’s GDP growth. Last year GDP grew by seven per cent and corrugated consumption grew by six to seven per cent. The export packaging market is bigger than

domestic demand, but both sectors are growing,” Mr Wang said. “We don’t feel that the corrugated industry has reached overcapacity, as demand is growing every year. We believe that the market will grow quickly for the next five years. Further ahead, in five to 10 years time, we are not sure, but we think the market will remain positive.”

Recent investment by locally-owned corrugated companies has created a two-tier industry, with domestic companies supplying sheets and boxes to customers packing goods for the local market. Foreign-owned corrugated plants supply high quality sheets and boxes to customers exporting their products and to customers wanting high quality packaging to supply goods to Vietnam’s domestic market. “Locally produced corrugated board is of lower quality, so we do not feel a threat. We produce higher quality board and boxes while they supply mostly local customers,” Mr Wang said. “The addition of the second BHS Corrugated machine has been a good move for us,” he concludes. n

CONSUMPTION OF CORRUGATED BOARD IS EXPECTED TO REACH AN ESTIMATED 1.1 BILLION SQM IN VIETNAM THIS YEAR, WITH DEMAND FOR CORRUGATED PACKAGING GROWING AT A STRONG SINGLE DIGIT RATE AT PRESENT.