The global wood pellet market is likely to reach USD 15.63 billion by 2026. Vietnam is currently the world’s second-largest supplier of wood pellets. With its existing advantages and rising global demand, Vietnamese wood pellet businesses are seeking new development pathways in this expanding market.
With traditional energy sources such as coal, oil, and gas gradually depleting, the demand for alternative fuels has become urgent in many countries. Therefore, Vietnamese wood pellets will be able to become a promising substitute. This is due to their abundant raw materials, availability, and relatively low production costs. In particular, advances in technology that improve the calorific value of wood pellets have made them a viable alternative to conventional coal in energy production.
At the 2021 United Nations Climate Change Conference (COP26), most countries committed to reducing greenhouse gas emissions or even achieving net-zero targets. To achieve this, the development of a low-carbon energy economy has become an essential direction.
Vietnamese wood pellet enterprises
Markets in Asia, particularly Japan and South Korea, as well as Europe, are experiencing strong demand for wood pellets in clean energy production. The Asia–Pacific region is home to the largest number of coal-fired power plants in the world. It is likely to be the fastest-growing market in the coming years. This creates significant opportunities for Vietnamese wood pellet businesses.
According to the World Bioenergy Association, the global wood pellet market is likely to reach USD 15.63 billion by 2026, with a compound annual growth rate (CAGR) of 7.28% during the 2021–2026 period.
According to the Vietnam Timber and Forest Products Association, wood pellets are among the five highest-value export products in Vietnam’s wood industry. Vietnam is currently the world’s second-largest exporter of wood pellets.
Over the past seven years, production, export volume, and export value of wood pellets have increased significantly. Specifically, export volume surged more than 18.28 times. It rose from 175,000 tonnes in 2013 to about 3.2 million tonnes in 2020. Export value also rose 15.3 times, from nearly USD 23 million in 2013 to USD 351 million in 2020.
Japan and South Korea are the two main export markets for Vietnam’s wood pellets, accounting for 99.8% of total export turnover in 2021. Demand in these markets has been particularly strong following natural disasters such as earthquakes and tsunamis. These events have accelerated the development of bioenergy.
In 2021, South Korea imported 1.96 million tonnes of wood pellets from Vietnam, worth USD 212.04 million. This went down 0.9% in volume but up 9.6% in value compared with 2020. Japan imported 1.53 million tonnes in the same year, equivalent to USD 200.11 million. This was up 26.1% in volume and 27% in value year-on-year.
In Japan, wood pellets are likely to meet 38% of total energy demand by 2030. Several Vietnamese wood pellet businesses also note that shipments to this market could expand by up to three times by 2024–2025 compared with current levels.
Wood pellets are considered an ideal substitute for fossil-based fuels. This is not only because of their low emissions and renewability but also due to their low production cost.
Vietnamese wood pellet materials
From an economic perspective, Vietnam’s wood pellets exports are made from inexpensive and readily available raw materials that are not selective in input sources. Meanwhile, the finished pellets maintain stable export value and, in some cases, even increasing prices. Export prices to the Japanese market range from USD 127–139 per tonne. In South Korea, the second-largest export market, prices recorded a notable increase in the last six months of 2021. They ranged from USD 97–134 per tonne.
Typically, Vietnamese wood pellet businesses make use of all available by-products such as sawdust, wood chips, and wood shavings. Some even utilize agricultural residues from other industries, including rice husks, straw, bagasse, crop stalks, and shells. In this way, businesses can effectively “double” their revenue streams.
Previously, enterprises mainly earned profits from processing and exporting traditional wood products such as furniture and raw timber. The emergence of the wood pellet market has enabled companies to significantly increase product value. It has also helped them handle a large portion of waste generated during production.
Another advantage of wood pellet production is its relatively simple process, which does not require highly advanced technical skills. While furniture manufacturing involves multiple complex stages requiring craftsmanship and aesthetic expertise, wood pellet production is much more straightforward. The process includes five main steps: crushing, drying, pressing, cooling, and packaging. It is largely automated by machinery, saving both time and labor costs.
Vietnamese wood pellet businesses are currently on a strong growth trajectory, providing a solid foundation for future expansion. However, several challenges still need to be addressed to ensure further development. According to Dr. To Xuan Phuc, an expert from Forest Trends, this “half-billion-dollar” export industry still faces a number of limitations.
Due to its simple production process, wood pellets can be manufactured easily by both small and large facilities. However, the raw material supply chain is not always strictly controlled in terms of quality and legality.
Vietnamese wood pellet factory
In terms of quality, several Vietnamese wood pellet businesses still use mixed or unstandardized inputs. This results in low-quality products that can damage their reputation in international markets. Therefore, a key requirement for long-term success in this promising industry is that enterprises must proactively screen and control raw material sources more strictly. They must also avoid contaminated or poor-quality inputs.
Another challenge faced by Vietnamese pellet businesses relates to procurement and export procedures in certain markets. For example, selling to South Korean thermal power plants often requires going through a trading intermediary. This makes small and medium-sized enterprises heavily dependent on third parties. It also significantly increases costs for end customers.
This situation highlights the need for stronger institutional support and better connectivity through representative organizations and agencies. Such measures are necessary to reduce trade barriers and help Vietnamese wood pellet businesses access international markets more effectively.
Another factor limiting export value and hindering access to demanding markets such as Europe and Japan is the relatively low level of Forest Stewardship Council (FSC) certification. In response, the forestry sector has developed a plan to expand FSC-certified forest areas. The target is to reach 10 million hectares by 2030.
According to the Directorate of Forestry, Vietnam’s timber raw material supply has improved significantly through the development of plantation forests. It now meets about 75% of annual domestic demand. In recent years, Vietnamese wood pellet exports have reached around 3 million tonnes per year, equivalent to approximately USD 350 million in export value. This figure could increase further if Vietnamese wood pellet businesses address existing shortcomings and adopt more appropriate production and business strategies.
Vietnamese source: https://scp.gov.vn/tin-tuc/t12923/vien-nen-go–thi-truong-tiem-nang-cho-doanh-nghiep-viet
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