With the increasing demand in the energy market, wood pellet industry in Vietnam has much room for sustainable development. Especially, products that follows Forest Stewardship Council (FSC) certificate will have more opportunities for development.
In 2020, there were more than 300 factories of wood pellets in Vietnam. In which, southeastern provinces account for more than 50% of the total factories. The main reason for this strong concentration would be that wood by-products from other processing facilities are brought in as input material to produce pellets.
Such input sources include sawdust, shavings, twigs, and tops of planted wood with small sizes. The wood pellet factories do not require large and complex investments in management technology. Thus, this enables them to easily participate in the production.
In addition, Vietnam has a geographical advantage when it comes to these raw materials as exports seaports are nearby, enabling convenient transportation.
Wood pellet industry in Vietnam
The demand for wood pellets will be highly possible to expand three times by 2024-2025 compared to 2021. However, a significant supply-demand imbalance, together with issues in quality and legal conditions, affect large-scale exporters and the sustainable development of the wood pellet industry in Vietnam. Up to now, most of the exporting enterprises of wood pellets act rather spontaneously, without much institutional support to regulate the development of the industry.
Therefore, there are several limitations within the industry:
Firstly, input materials lack quality control. Moreover, several processing facilities use low-quality materials, affecting the pellet’s quality. The input supplying with FSC certification is also not much, while more and more importers require products with this certificate.
Next, the industry is facing with greater supply than demand, leading to fierce competition among businesses and including price manipulation. While many enterprises involving in processing, only a few exporters of wood pellets exist. With this current situation, the industry remains unsustainable development.
Wood pellets in jumbo bags
Nevertheless, wood pellets are important export items of Vietnam. In recent years, more than three million metric tons, equivalent to $350 million, had been exported. South Korea and Japan are the most important markets of Vietnam’s wood pellets. Specifically, these two markets account for more than 90% of the total annual export volume.
Particularly in 2021, Vietnam’s wood pellet exports reach 3.5 million MTs, with export revenue of USD 413 million. The pandemic has had an impact on all socioeconomic aspects, especially on production and exports. Like other industries, Vietnam’s wood pellet industry is facing difficulties, with exports and volumes falling sharply in recent months.
Also, the export turnover from the Japanese market is smaller than that of South Korea but has greater stability. The South Korean market had a very strong decline in 2019. Since then there has been no sign of growth again. The average export price to Japanese market is currently higher than the one to South Korea, about $20-30 per ton.
Materials to produce wood pallets
Information from several exporters of Vietnam’s wood pellets show that the current low export price to the South Korean market comes as this market applies an auction mechanism when buying products, with businesses offering low prices.
After receiving these contracts, the businesses return to manufacturers in Vietnam. They push product prices down to meet the contracts they have signed with buyers.
Meanwhile, the purchasing mechanism in the Japanese market does not follow the auction model. However, it depends directly on the agreements between buyers and sellers and consequently does not push down prices.
Statistical data shows that on average, more than 70 enterprises involving in export each year. The number of businesses participating in this stage has not changed much, at least between 2019 and 2020. However, this went down in 2021 to only 59, much smaller than in 2020 and likely due to the pandemic.
A wood pellet factory in Vietnam
The average export price per unit to Japan is always higher than to South Korea. This may cause exporters to move from the South Korean market to the Japanese market, or at least try to enter both markets. However, businesses participating in both markets at the same time are rare. For example, in 2020 only 10 enterprises were participating in both markets, but it remains unclear why.
In the next 2-3 years, if Vietnam’s production capacity still keeps at the current level, the supply and demand for wood pellets will be balanced. However, to do so, it is necessary to form an organization representing the industry. This organization would directly contribute to the regulation of production and export activities. Such an organization would take the role of connecting manufacturing and exporting enterprises and regulating output market.
The organization could then act as a focal point, providing members with information on the output markets, including on-demand and legal and sustainable requirements. Moreover, the organization could convey recommendations to management agencies to form policy mechanisms close to reality, promoting the sustainable development of the wood pellet industry in Vietnam.
(Source:https://agridecovietnam.com/developing-a-sustainable-wood-pellet-industry-in-vietnam/)
#worldexport #pellet #powder #sawdust #rubber #mixed #wood #fsc #pine #acacia #quality #export #vietnam #premium #vietnam #bedding #horse #flour
World Export is currently the market leading supplier in Vietnam. We have products available in quantities ready to meet your requirements.
Contact to receive product information and quotation:
