Paper industry on the brink of collapse

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The sole newsprint manufacturing company in the country was among the enterprises which went bankrupt and shuttered during the pandemic. In a hearing by the Tariff Commission on February 16, the Trust International Paper Corp. (TIPCO) formally announced that it has already shut down its plant in Mabalacat, Pampanga on June 2020. All of its 258 workers were retrenched.

The company hopes to restart its operations but prospects remain dim.

TIPCO attributed its bankruptcy primarily to the flooding of imported paper in the market and the absence of support for local producers. Just like other local companies, TIPCO suffered huge losses as it spent more for production with less advanced machinery, unable to compete with foreign companies who sold their products at lower prices. The company’s income was not enough to upgrade its machineries. Its sales and income shrank after the goverment dismantled the tariff on imported paper.

Conservative estimates by the Tariff Commission sought a duty of at least ₱2,470 per metric ton on paper products to safeguard local companies. However, the Department of Trade and Industry only implemented a tariff of ₱980 per metric ton on newsprint in 2015. This was further decreased by the Duterte regime to ₱800 in 2016, and to ₱640 in 2017.

Many local companies have closed down over the past two decades. Currently, there are only 23 paper manufacturing companies left in the country, from 43 in 2001 and 27 in 2010. Majority (21) of the remaining plants are in Luzon. These companies manufacture paper products including writing and printing paper, tissue, cartons, paper bags, and brown packaging paper. These products are produced primarily using imported virgin pulp and wastepaper.

The total value of paper produced in the Philippines decreased from ₱26 billion in 2019 to ₱21 billion in 2020. On the other hand, its imports increased to ₱71.2 billion in 2019, almost seven times higher than the ₱10.4 billion recorded in 2005.

The absence of technology to manufacture virgin pulp is a big hindrance to local producers. The country’s unrestricted importation of virgin pulp started in 2010 after the processing plant of the Paper Industries Corporation of the Philippines (PICOP) in Surigao del Sur closed down. PICOP was the sole local company capable of manufacturing the said product.

As an alternative, local companies use recycled wastepaper in producing paper products. There are around 80 processing plants in the country with the capacity to convert wastepaper. However, a report by the Food and Agriculture Organization in 2014 indicates that this technology is not enough to meet the internal demand for paper. In fact, local producers also imports a portion (10%) of the wastepaper which they utilize. The quality of paper produced by local companies is weaker because of their relatively backward technology. As a result, local producers could not compete with big foreign companies who can produce more paper at cheaper costs.

There are also four abaca pulp manufacturing companies in the Philippines. The said product can be used to manufacture paper money, tea bags and other paper products. However, the country do not benefit from these as their products are mainly for export. Nearly two-thirds of the total amount of the abaca pulp manufactured in the country are exported to Europe. The largest of these companies is the Newtech Pulp in Lanao del Norte, a subsidiary of US-based multinational company Glatfelter. Among Glatfelter’ major clients is Unilever, a Europe-based company which owns Lipton Tea.

Paper industry on the brink of collapse