1. Export markets
- South Korea and Japan are the two largest wood pellet importers of Vietnam. The volume and export turnover of this item to South Korea and Japan accounted for 97% of the total volume and export value from Vietnam from all markets in 2022.
2. Driving force and export trends to South Korea and Japan
South Korean market
- Information shared by a number of export enterprises shows that by the end of the first 6 months of 2023, the volume of wood pellets exported from Vietnam to South Korea reached about 0.8 million tons. It is expected that by the end of 2023, the volume of Vietnam’s exports to this market will reach about 1 – 1.5 million tons.
- Vietnam is the main source of wood pellets for South Korea (supplying 80% of the total demand of this market). However, South Korea is currently diversifying its supply sources, including imports from Russia. According to some businesses, wood pellets from Russia are of good quality and cheap. Before the Russia-Ukraine conflict broke out, Russia exported about 3 million tons of wood pellets to the world every year, mainly to the EU. However, due to the conflict, Russia is currently under sanctions from Western countries and Russian wood pellet businesses are facing difficulties in exporting. In this context, some Russian businesses have to find alternative markets, accepting cheap export prices to penetrate the market. However, it is not expected that there will be a sudden increase in the amount of wood pellets imported from Russia to Korea in the future. The reason is that the sanctions applied to Russian exports have caused state-owned energy companies and large, well-known corporations in Korea to refuse to use wood pellets from this source. Currently, only a few small-scale, privately owned power plants in Korea use wood pellets from Russia. Therefore, the potential for expanding the Russian wood pellet market share in Korea is not large. The first months of 2023 witnessed a huge price fluctuation for Vietnamese wood pellets exported to Korea. The lowest import-export price (FOB Vietnam) dropped to only 78 USD/ton (April 2023). This price is determined to be below the production price. This caused a number of Vietnamese wood pellet enterprises, especially small enterprises without financial potential, to stop production. In order to minimize risks for manufacturing and exporting enterprises, the Pellet Association has carried out a number of practical activities, including connecting with enterprises in Korea to provide more information on the production situation. Since then, the export price has gradually increased. The price at the beginning of July reached about 110 USD/ton. The export price to Korea tends to increase, but there is currently no information about the rate of increase in the near future.
- Demand for wood pellets from Korea is increasing again. However, the purchasing method of Korean buyers has changed a lot. Instead of purchasing in large quantities of bids, Korean buyers are now dividing the bid losses into smaller quantities (monthly) to reduce price pressure (large purchases, inventory).
- One of the reasons why the import price of wood pellets from Vietnam to Korea is on the rise is due to the increase in the price of input materials for wood pellet production in Vietnam. Currently, the supply from Vietnam accounts for 80% of the total import volume of Korea. Unlike the raw materials for wood pellets exported to the Japanese market (mainly using wood from domestically grown forests with FSC certification), the raw materials for wood pellets exported to Korea are mainly by-products of the wood processing industry (sawdust, shavings, scraps, etc.). Because the Southeast provinces are where wood processing enterprises for export are concentrated, the wood pellet enterprises exporting to Korea are also concentrated in this region. Recently, the output market of wood products has decreased sharply, causing the source of by-products from processing to decrease deeply. In the context of the continuous demand for wood pellets in Korea, the decrease in the supply of raw materials for wood pellet production has led to competition between manufacturing companies, pushing up the price of raw materials for wood pellets.
Japanese Market
- The Japanese market is much more stable than Korea, with long-term orders (purchase and sale contracts are usually 10-15 years) currently exported at prices ranging from 145-165 USD/ton (FOB Vietnam). In addition to long-term contracts, some Japanese enterprises also execute short-term contracts with some Vietnamese suppliers. The prices of short-term contracts are often lower than the prices of long-term contracts (currently at around 125 USD/ton, FOB), with quality equivalent to products exported under long-term contracts.
- Until 2023, Vietnam exports about 1 million tons of wood pellets to Japan. The entire amount of pellets exported to Japan requires FSC certification. The raw materials for wood pellets exported to Japan are from domestically planted forest wood, mainly from acacia trees. This source of raw materials is different from the raw materials for pellets exported to Korea.
- Demand for wood pellets in Japan will increase sharply in the future. According to information from some businesses, Japan currently uses about 8 million tons of wood pellets each year, 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 wood pellets in Japan will increase to 20 million tons, of which wood pellets will account for about 13-15 million tons (the rest are oil palm kernels). The demand for wood pellets used in Japan will expand in the future. This is a great opportunity for Vietnamese businesses, especially those with stable input materials and sustainable certification, large-scale factories, and systematic management.
3. Future competition
- The Vietnamese wood pellet industry will face competition from wood pellets from other countries. When the energy crisis occurred due to the Russia-Ukraine conflict, the price of wood pellets in the world increased sharply. This has created a wave of investment in wood pellet production in other countries (and Vietnam). There are already some factories in operation and some more are about to come into operation. In the future, Vietnamese enterprises will have to compete with these factories, especially those in Indonesia and Malaysia.
Note: The information in this article is for reference only and may change depending on the manufacturer and source of raw materials. For the most accurate information, you should consult experts, wood pellet suppliers or contact Overc.vn to answer your questions and problems related to wood pellets and wood chips.
Source:
- Hawa
- Overc Team synthesise, analyse and write articles.
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OVERC was established in Vietnam, which has 17 FTA (Free Trade Agreement).
Vietnam is one of the countries with the most FTAs in the world.
Our main activities are manufacturing and distributing Wood Pellets and Wood Waste. Our wood pellet products, which are made from Acacia veneer residual 100% or wood waste (logs, sawdust, wood chips, wood shavings,…), have been exported to many countries around the world such as Japan, Korea, EU, etc.
OVERC Co.,Ltd would like to wish you all the best at this time.
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