Vietnam has become the world’s second-largest wood pellet producer, after the United States. Most Vietnam’s wood pellets are exported to South Korea and Japan as input materials for power plants.
Vietnam’s wood pellet exports increased 28 and 34 times, in volume and value, respectively, over more than 10 years since 2013. In 2022, Vietnam exported 4.9 million tons of wood pellets, generating $0.79 billion. In early 2023, exports reached 1.57 million tons, valued at over $256 million.
Vietnam’s wood pellets
According to a forecast, global demand for wood pellets will increase by approximately 250% over the next decade. The volume will reach to 36 million tons from 14 million tons six years ago, in 2017. In recent years, demand has been increasing from Japan, South Korea, and European countries.
Currently, Vietnam’s wood pellets exported Japan and South Korea account for about 95% of its total pellet exports to all markets.
However, there are differences in wood material sources for wood pellets for South Korea and Japan. Wood pellets for South Korea are mainly made from by-products of the wood processing industry, such as sawdust, wood shavings, and leftover wood scraps. Wood pellet exporters to South Korea mainly located in the Southeast region, where there are many wood processing factories.
Rice husk powder
In the meanwhile, wood pellet exports for Japan require domestic plantation wood, which owns FSC certificate. This material is easy to find in large plantation areas, especially from the central region to the north.
Since April 2022, the export market for wood products has declined. By-products from the industry, as raw materials for wood pellets, also decreased. As a result, it led to a shortage of materials for pellet exports to South Korea.
The energy crisis caused by the Russia-Ukraine conflict has significantly increased global demand and prices for wood pellets. This has sparked a wave of investment in pellet production not only in Vietnam but also in other countries. This wave has intensified competition among wood pellet companies in Vietnam and between Vietnamese businesses and those in other countries.
Wood powder for pellet production
In early 2023, the South Korean market experienced significant fluctuations. The price of Vietnam’s wood pellets to South Korea dropped below $90 per ton (FOB) in April. This price is below the production cost for many processing businesses of wood pellets. There are a lot of companies, especially small-scale ones, had to stop operations.
In the first half of 2023, Vietnam exported about 0.8 million tons of wood pellets to South Korea. By the end of 2023, Vietnam’s wood pellets export to this market will reach about 1-1.5 million tons. Vietnam is the main supplier of wood pellets to South Korea, accounting for 80% of the market’s total demand. However, South Korea is currently diversifying its supply sources, including imports from Russia.
According to several businesses, Russian wood pellets are of good quality and low prices. Before the Russia-Ukraine conflict, Russia exported more than 3 million tons of wood pellets annually, mostly to the EU. However, due to the conflict, Russia is now facing sanctions from Western countries, and Russian pellet companies are struggling with exports.
Acacia wood pellets from Vietnam
In this context, several Russian businesses are seeking alternative markets, accepting lower export prices to enter those markets. Nevertheless, there will not be a significant increase in the volume of pellets imported from Russia to South Korea in the future. The reason is that sanctions on Russian exports have caused large South Korean corporations to refuse to use pellets from this source.
Currently, only a few small, privately-owned power plants in South Korea use pellets from Russia. Therefore, the potential for expanding Russia’s market share in South Korea is not huge.
In the early months of 2023, the price of wood pellets exported from Vietnam to South Korea fluctuated greatly. This caused some Vietnamese pellet companies, especially small ones without strong finance, to halt production.
The Japanese market is much more stable than the South Korean market, with long-term contracts. These contracts last from ten to fifteen years at prices ranging from $145 to $165 per ton (FOB price Vietnam). In addition, several Japanese companies also engage in short-term contracts with certain Vietnamese suppliers. The prices of short-term contracts are usually lower than those of long-term contracts.
Wood pellets in jumbo bags
To date, Vietnam has exported about 1 million tons of wood pellets to Japan. All pellets exported to Japan require FSC certification. The raw material for these pellets comes from domestic plantation wood, primarily from acacia trees.
According to an expert from Forest Trends, demand for wood pellets in Japan will rise sharply in the future. Japan currently uses about 8 million tons of pellets annually, with 40% made from palm kernel shells and the remaining from wood pellets.
Japan’s demand for pellets will increase to 20 million tons by 2030. In which, wood pellets accounts for more than 13 million tons. This presents a great opportunity for Vietnamese companies, especially those with stable raw material sources and sustainable certifications.
Vietnamese source: https://nhandan.vn/kha-quan-thi-truong-xuat-khau-vien-nen-go-post762173.html
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