Cheng Loong Corp., Taiwan’s largest producer of industrial-grade paper, will increase output in Vietnam under a $1 billion investment plan that signals more focus on the Southeast Asian country and away from China.
Amid the Sino-U.S. trade war and the global coronavirus pandemic, Cheng Loong has mapped out a development plan for its Binh Duong plant in southern Vietnam, spokesman Ho Tai-lang told NNA on Monday. It will be phased in over three to five years, Ho said.
The 80-hectare plant for industrial paper today has annual capacity to make 300,000 tons of corrugated sheet board. As part of the long-term plan, the Taiwanese firm is now spending $200 million to build a linerboard production line with capacity of 350,000 to 400,000 tons per year to start operating in the fourth quarter of 2021, Ho said. Linerboard is thin cardboard for the flat side of corrugated paper.
Another 300,000 tons of industrial paper products will be added to the annual output in the third phase.
Cheng Loong’s Vietnam plan eventually will produce around 1 million tons of industrial paper products and 50,000 tons of tissue paper every year, Ho said. The company separately plans to establish a corrugated container-making plant with $10 million in Bac Giang province near Hanoi.
The firm’s industrial paper output in Vietnam surpassed that of Taiwan in 2018 as demand grew faster in the Southeast Asian country, according to the company.
“Our aim is to further grow in Vietnam, as we’re definitely focusing on overseas operations for long-term development,” General Manager Tsai Tong-ho said at an investor conference last Friday.
Sales contributions from China declined from 34.3 percent in 2016 to 20.1 percent in 2019, its financial statement showed. Because of the 2-year-old U.S.-China trade dispute and the Covid-19 pandemic, the company has temporarily stopped seeking customers in China. Washington raised tariffs on good exported from China as part of the dispute.
“We’re not in a hurry to expand China production, at least for the next one to two years,” Ho said.
Cheng Loong hopes to as well to expand its Taiwan market share in packaging and household paper products.
Other Taiwanese companies with China factories are testing the home market to dodge tariffs on goods shipped out of China. “We’re expecting booms in demand for packaging cartons as many companies are returning,” Ho said.
Cheng Loong has drawn a NT$4.78 billion ($159 million) plan to ramp up production and upgrade its Taiwan facilities, including a corrugated container plant in the southern port city Kaohsiung.
The new Kaohsiung plant is expected to launch in the first half of 2021 with annual capacity for 180 million square meters of paper, the company said in a statement.
Cheng Loong reported revenue of NT$40.4 billion in 2019, down 2 percent from the previous year, according to a financial statement.
Tsai forecasts revenue for the first half of this year will be flat or decline slightly due partly to weakening demand caused by economic shocks from Covid-19.