Export of wood pellets on the rise

In the first 6 months of 2023, the export of pellets is estimated at 1.85 million tons, with an estimated turnover of nearly 300 million USD. Photo: NT

The second largest exporter of wood pellets in the world

According to the Vietnam Wood and Forest Products Association (VIFOREST), Vietnam has now become the second largest pellet producer in the world, after the US. Most of the pellets produced in Vietnam are exported with over 95% of the export volume going to Korea and Japan as input materials for power generation. A small amount is consumed domestically in Vietnam as fuel for boilers, kilns, etc. From 2013 to 2022, the volume and value of Vietnam's pellets export turnover has grown exceedingly, with an increase of 28 and 34 times, respectively.

According to the General Department of Customs, in 2022, Vietnam exported 4.9 million tons of wood pellets with a turnover of 0.79 billion USD. In the first 6 months of 2023, the export of pellets is estimated at 1.85 million tons, with an estimated turnover of nearly 300 million USD. Currently, Vietnam is the main supplier of tablets to Korea (accounting for 80% of the total demand of this market), so in the first 6 months of 2023, the volume of Vietnamese tablets exported to Korea reached about approx. 0.8 million tons. The first months of 2023 witnessed huge price fluctuations for Vietnamese pellets exported to Korea. The lowest import and export price (FOB Vietnam) dropped to only 78 USD/ton (April 2023). This is the price that is determined to be below the production price, causing some Vietnamese tablet enterprises, especially small businesses with no financial potential, to stop production. After that, the export price level began to gradually increase. The price at the beginning of July has reached about 110 USD/ton and is trending up.

According to Vietforest's analysis, one of the reasons why the import price of tablets from Vietnam to South Korea is on the rise is the increase in the price of input materials to produce tablets in Vietnam. Currently, the supply from Vietnam currently accounts for 80% of Korea's total imports. Different from the source of raw materials for making pellets exported to the Japanese market (mainly using wood from domestically planted forests with FSC certificate), the source of raw materials for pellets exported to Korea are mainly by-products of the woodworking industry (sawdust, shavings, bits...). Because the Southeast provinces are the places where export wood processing enterprises are concentrated, Korean export pellet companies are also concentrated in this region. Recently, the output market of wood products has dropped sharply, causing a deep decrease in the source of by-products from processing. In the context that the demand for tablets in Korea did not decrease, the decrease in the supply of input materials for tablet production led to competition among manufacturing companies, pushing up the price of tablet materials. It is expected that by the end of 2023, Vietnam's export volume to this market will reach about 1-1.5 million tons.

Thus, it can be seen that the demand for tablets from Korea is increasing again. However, the way Korean businesses buy goods has changed a lot. Instead of buying by bulk bidding, Korean businesses now divide bidding shipments into smaller quantities (monthly) to reduce price pressure (large purchases, inventory).

The Japanese market has high stability in both quantity and price

Besides the volatility of the Korean market, the Japanese market is more stable, with long-term orders (buy-sell contracts are usually 10-15 years) currently being exported at prices ranging from around 145 USD – 165 USD/ton (FOB Vietnam). Besides long-term contracts, some Japanese enterprises also perform short-term contracts with some Vietnamese suppliers. The prices of short-term contracts are often lower than those of long-term contracts (currently around $125/ton, FOB), with the same quality as products produced under long-term contracts.

In the first 5 months of 2023, the amount of pellets Vietnam exported to Japan reached 0.87 million tons, with a turnover of 151 million USD. Export volume decreased by 5.7% while turnover increased by 19.7% over the same period in 2022. Up to now, Vietnam has exported about 1 million tons of tablets to Japan.

According to the assessment, the demand for tablets in Japan will increase sharply in the future. Information from some businesses said that each year, Japan uses about 8 million tons of pellets, of which 40-50% are oil palm kernel shells, the rest (50 - 60%) are wood pellets. . It is expected that by 2030, the demand for pellets in Japan will increase to 20 million tons, of which the amount of wood pellets will account for about 13-15 million tons (the rest is oil palm kernels). The demand for tablets used in Japan will expand in the future. This is a great opportunity for Vietnamese businesses, especially those with stable input materials and sustainable certifications, large-scale production plants, and methodical management.

According to experts, the export of wood pellets is currently on the rise thanks to many favorable factors from the world market. Accordingly, the world's demand for tablets will increase by about 250% in the next decade, reaching 36 million tons from 14 million tons in 2017. In recent years, demand has increased mainly in European countries, Japan and Korea. However, Vietnam's pellet industry has the opportunity to expand the market when consumption demand in Vietnam begins to show signs of rapid growth because the Government is making efforts to fulfill its commitments to reduce greenhouse gas emissions and use clean energy, including pellets to replace coal in energy production. Along with that, the Power Plan VIII approved by the Government on May 15 also prioritizes the development of renewable energy sources, including biomass power to replace high-emission coal power. Therefore, the demand for tablets in the domestic market may expand very quickly in the future.