According to the Vietnam Timber and Forest Product Association (VIFOREST), although it is forecasted to grow strongly, however, the wood pellet industry has focused on exporting to the Korean and Japanese markets, which has made this industry fall into a situation of being squeezed the price and has not made a breakthrough as expected
Exports have increased continuously for nearly 10 years
Vietnam’s wood pellet industry has joined the wood industry for less 10 years, it has made the spectacular growth in both export volume and value. In particular, 2018 is considered as the year of breakthrough development for wood pellets. As of the first quarter of 2021, this product continues to increase strongly in both export volume and value. Specifically, in 2013, Vietnam exported 175.49 thousand tons, it was equivalent to US$22.98 million; in 2014, this figure increased to 774.04 thousand tons, gained US$117.41 million, up 341% in volume and 411% in value; 2015 witnessed a strong growth in this product, exports reached over 1,005 million tons, up 30% compared to the previous year, but decreased by 11% in value to US$104.27 million; in 2016 and 2017: the export value and volume of this product increased steadily, reached 1.35 million tons (in 2016) and 1.58 million tons (in 2017), made the export turnover of this product to about US$150 million per year, accounted for over 2% of the total export value in the whole wood industry.
Notably, 2018 is considered a year of breakthrough development of wood pellets, its export turnover reached over 2.64 million tons, US$362.16 million, up 67% in volume and 120% in value compared to the previous year, made this product achieve 4.3% of the total export value of the industry. In 2019, the export volume reached 2.79 million tons, a slight increase by 6% compared to the previous year, but decreased by 14% in value, gained US$311.08 million, because the export price of this product decreased by over US$25 per ton compared to the previous year; In 2020, the export volume is 3.207 million tons, up 15% compared to the previous year, reached US$352.04 million, up 13% in value. For the first 3 months of 2021, the export volume gained 0.81 million tons, it was equivalent to US$90 million, up 18% in volume and 23% in value over the same period in 2020.
“The data from ITC shows that, for the past 5 years, the consumption value of wood pellets has increased from US$2.5 billion in 2016 to US$4.35 billion in 2020, equivalent to increasing the volume of exported wood pellets from 16 0.8 million tons (in 2016) to 28.7 million tons (in 2020). The growth trend of wood pellet consumption market will continue to take place strongly in the coming years when the US Government officially supports and returns to the Paris Agreement on climate change. “
Avoid putting all eggs in one basket
As an enterprise specializing in the production of wood pellets in Quang Ninh, Mr. Le Thanh Tung, a director of Thanh Lam Co., Ltd shared, currently his company’s products were exported through a third party to the main market of Japan. His company has been also promoting its direct exports to this market. However, due to the Covid-19 epidemic, partners do not work directly as well as connect for export cooperation. This enterprise mainly exploits the input materials for wood pellet production in Quang Ninh and the Northern mountainous region. There is a bit of concern with the input supply because sometimes it has to compete with the woodchip industry, however, according to Mr Tung, this is not too big issue for this industry. The market is very open, input is not difficult, his business has also been planning to expand its production. According to Mr Tung, many countries are interested in the Paris Agreement on climate change, the manufacturing industry of wood pellets in Vietnam will continue to grow stronger in the coming years.
The wood pellet industry not only has growth. According to experts, the demand for wood pellets with forest certifications (FSC, PEFC) has been increasing day by day, however, timber volume after processing as input materials for wood pellets have not ensured a large supply and often affected the signing of orders. On the other hand, the increase in domestic road transport and sea freight rates will affect the export prices of enterprises. Notably, unlike other products, Vietnam’s export markets of wood pellets are concentrated in two main markets, South Korea and Japan. The export volume and value to these two markets account for 99%, the rest belongs to other markets such as Taiwan and China. In the two main export markets of wood pellets, over 60% of the total export volume focuses on the Korean market. Therefore, domestic exporters are easily squeezed the price by the Korean partners.
The analytical data from the Customs showed that the export price of wood pellets to the Korean market strongly fluctuated by month, the monthly average price is at US$98-99 per ton. There was a time when the average export price to this market was only US$77 per ton, but there was other time when the export price reached US$144 per ton.
The Japanese market accounts for about 36-38% of the total export volume and value of Vietnam’s wood pellets. The average export price of this product remains stably at US$131 per ton. There was a time when the average price reached US$143 per ton in March 2019. On the other hand, the potential of Vietnam’s manufacturing enterprises of wood pellets is not large, mainly on a small scale and lack of linkages. Moreover, the fact that Vietnamese businesses are currently too dependent on the Korean market as “putting all eggs in one basket”, so when this market stops buying, their production and consumption will be stagnant.
Finding the way to expand the export market for wood pellets outside Korea
The most potential markets for expansion are Japan, United Kingdom and EU. Because these markets are paying more and more attention to the use of clean fuel sources, the assurance of environmental hygiene. In 2020, the main consuming countries of wood pellets in the world spent nearly US$4.55 billion importing 25.85 million tons of wood pellets, up 4% in value and 5% in volume compared to 2019. According to the VIFOREST, the demand for wood pellets in the world is forecasted to increase. Currently, South Korea is the market that consumes the most products, but from 2023, Japan will rise to the top of consumption. Vietnam has the conditions for biomass materials as well as a convenient location to transport products to major consumer markets such as Japan and South Korea. The VIFOREST recommends that the Japanese market is strict in many aspects, but conquering the most fastidious customers in this market will open the way to the international market. Besides, the diversification of export markets is also a problem for exporters of this product.
Post time: Jan-04-2022