FocusVietnam inflation hits chem processors

08 April 2008 10:26  [Source: ICIS news]

By Chow Bee Lin

 

SINGAPORE (ICIS news)--Soaring inflation in Vietnam has raised the cost of processing petrochemicals significantly, by as much as 10%, local processors said on Tuesday.

 

“The cost of operating a business in Vietnam is estimated to have risen 6-10% compared with last September due to higher production costs such as transportation,” a polyurethane (PU) foam maker said.

 

“Delivery costs of PU foam had risen by around 20% due to the higher gasoline prices, and that has significant impact on our business because foams are bulky,” he added.

 

“In general, the plastics industry has been affected by inflation but it will still grow,” the plastics processor added, estimating the plastics industry’s growth would slow to 10-15% this year, from last year’s 20-25%.

 

The high inflation was indicated by the country’s consumer price index (CPI) which according to the General Statistics Office (GSO) of Vietnam was estimated to have risen by 16.38% in the first quarter this year, compared with the same period last year, with prices of food grain, transport, housing and construction material registering the biggest increases.

 

The CPI rate of increase was lower in March compared with the previous two months but it was “unusually high” compared with the same month in previous years, the GSO said.

 

Inflation had also resulted in higher labour costs for processors, the foam maker said.

 

The minimum monthly wage was raised to Vietnamese dong (D) 1m ($62.05) early this year from D870,000 “but most employers were paying more because workers generally would not settle for the minimum pay due to inflation”, the foam maker added.

 

The basic salary in Vietnam had on average risen 20% since January but purchasing power had not improved in real terms due to high inflation in the first quarter, according to the GSO.

 

Local gasoline prices were estimated to have increased by 5-7% in the last two to three months, the plastics processor said.

 

The cost of credit had also increased due to a recent interest rate hike implemented as part of the local government’s efforts to curb inflation, the processor added.

 

“The higher interest rate has made it harder for plastics processors to obtain loans,” he said.

 

Vietnam is one of the key plastic resins importers in southeast Asia. The country imported around 800,000 tonnes of polyethylene (PE) and 300,000-350,000 tonnes of polypropylene (PP) for local consumption last year.

 

PU foams are made from petrochemicals such as toluene di-isocyanate (TDI) and polyether polyols.

By: Chow Bee Lin
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