1. Production and export of pellets
The demand for pellets in the world is increasing. Vietnam’s pellet industry is facing great opportunities in expanding production and export. However, there are still some factors that have a direct impact on the sustainability of the industry. This requires businesses in the industry and current policy mechanisms to make adjustments in the future.
2. Unstable input source of raw materials
The input source of wood plays the most important role in the growth of the industry. The current source of raw materials for the wood pellet industry is mainly by-products from wood processing facilities. However, the source of raw wood, especially in areas where there are developed wood chip production and export facilities (for example, Quang Nam, Quang Ngai, Binh Dinh, Phu Yen) is facing fierce competition with raw materials for the wood chip industry.
According to some businesses, the current cost of producing wood pellets is about 30 USD/ton higher than the cost of producing wood chips, but the export price of wood pellets is about 30 USD/ton lower than the export price of wood chips. Wood chips absorb raw materials, pushing raw material prices up very high in recent times. Many wood pellet businesses, especially those with previously signed export contracts and unable to change export prices, cannot compete with wood chip businesses in terms of raw materials. This has led to some wood pellet businesses having to limit production.
In the context of a shortage of input materials, some wood pellet businesses have to use more “mixed” materials and expand their input material purchasing network to more distant locations. For example, some businesses in Quang Nam have to buy raw materials from the Central Highlands, nearly 200 km away from the factory. Some factories have reduced their production scale and increased their purchasing of products in remote areas, which have less competition for raw materials with wood chip processing facilities. Expanding the raw material purchasing network is a short-term solution for businesses to maintain production activities and meet previously signed orders. However, this poses some risks in controlling the supply chain, including controlling the risks of input materials related to activities that damage natural forests.
In the future, wood pellet production and export enterprises (as well as enterprises producing wooden furniture, wood chips, plywood, etc. using planted wood) need to pay attention to creating their own raw material areas to stabilize the source of input materials. Creating raw material areas can be done through businesses linking with households, who have access to land for forest planting. Wood pellet enterprises can also seek opportunities to cooperate with forestry companies that have land for production to develop raw material areas. Being proactive in raw material sources through forms of cooperation with forest growers or/and forestry companies helps enterprises stabilize production and business.
The trend of wood pellet consumption in major markets around the world shows that in the future, these markets will require wood pellet sources using sustainable certified raw wood. Vietnamese enterprises need to proactively grasp market information and prepare to meet these market requirements in the future.
Currently, the Vietnamese Government is encouraging the expansion of planted forest areas and areas with sustainable forest management certification. This is an opportunity for enterprises using planted forest wood as input wood materials, including wood pellet enterprises, to form joint ventures to create stable and sustainable sources of raw wood materials.
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:
- Goviet org
- 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.
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