Vietnam is the world’s second-largest pellets exporter

Pellets export grows rapidly

According to the General Department of Customs, in 2013, Vietnam exported a moderate volume of 175,000 tons of pellets, worth USD 22 million. By 2020, the number of pellets exported reached  3.2 million tons, worth USD 352 million. With the rapid growth rate in both quantity and value, Vietnam ranks the world’s second in pellets export, following the US.

According to Dr. To Xuan Phuc, Policy Analyst under Forest Trends Organization, the production, and export of the pellets sectors in Vietnam have been in incipiency for a decade, mainly responding to the demands of input materials for the bioelectricity development needs in Japan and Korea since the earthquake and tsunami. Therefore, nearly 100% of pellets from Vietnam are exported to Japan and Korea. This is the source of input materials for thermal power plants in these countries.

Pellets consumption demands in Japan and South Korea are in the upward trends that are considered an impetus for the development of pellets production and export in Vietnam. Besides, the demand to consume pellets worldwide also increase.

Association of Vietnam Timber and Forest Product (VIFOREST) cited statistics from the International Trade Center (ICT) showing that over the past five years, the global consumption value of pellets increased from USD 2.5 billion in 2016 to USD 4.35 billion in 2020, equivalent to the growth of export volume from 16.8 million tons in 2016 to 28.7 million tons in 2020. It continues to boom as the US government has officially sided and returned to Paris Agreement on climate change. This shows that Vietnam’s pellets production and export will be expanded further in the coming time.

Diversifying the export markets is a must

However, as mentioned by Phuc, Vietnam’s pellets production and export are facing some potential problems. First and foremost, the input material resources have not been managed well leading to the asynchronous quality of output products, or even substandard products, thereby, reducing the export prices.

The uncontrollable input materials may affect seriously the forest resources. The wooden input materials for pellets production mainly came from supplemental wood including sawdust, shavings, top branches of planted wood (acacia, eucalyptus, rubber), scattered trees...

Some sources said that there are cases of mixing the FSC-certified input material and other materials among manufacturing facilities, although the exported produced were announced to be granted certification of sustainable forest management. Therefore, this information needs to be fully verified shortly.

Although it has become one of the important export products of Vietnam's wood industry, the production and export of pellets have not received the appropriate attention from the management agency. Currently, the production and export of pellets are still developing in the direction of spontaneity.

The unavailability of connection mechanisms between businesses, processing facilities and the lack of common voice in production and business activities, have led to unfair competition among enterprises. Competition in terms of input materials, price, clients... has been taking place among production facilities, especially small-scale ones. Competition for input materials occurs not only with enterprises producing pellets but also between enterprises producing this product and enterprises producing other products such as wood chips and plywood. Many signals show that in the future, competition for input materials will become more and more fierce.

Many enterprises producing and exporting pellets, especially small-scale enterprises, do not understand information about export markets. Lack of access to information on export markets not only makes these enterprises and production establishments unable to take initiative in their production and business plans but also faces risks in not being able to meet the requirements. export market requirements.

Vietnamese pellets are mainly exported to South Korea (accounting for 60%) so that it is often pressured by partners and at risk of stagnation if the latter stops ordering. Therefore, VIFOREST believes that it is necessary to diversify the export market of pellets in the direction of approaching more Japanese, UK, and EU markets. These markets are paying more and more attention to the use of clean fuel sources, ensuring environmental hygiene.