Japan-invested firm inaugurates wood pellet factory in central Vietnam

Idemitsu Green Energy Vietnam, a business invested by Japan’s Idemitsu Kosan, inaugurated a wood pellet factory in the south-central province of Binh Dinh on Friday.

The factory in Hoai Nhon town has an annual capacity of 120,000 tons of green energy pellets that will be exported to Japan. Construction of the factory started in July 2022.

Idemitsu Green Energy Vietnam is certified by the Japan Gas Appliances Inspection Association (JIA) for using suitable and sustainable raw materials for production.

It lauded Binh Dinh for its abundant workforce, strong links between industrial parks and traffic infrastructure, diversified wooden materials, and the support of local authorities to carry out the investment.

Vietnam is embracing the circular economy with upcoming support policies from the government. Therefore, there are opportunities for businesses, including Idemitsu Kosan, said representative director Atsuhiko Hirano. The firm is committed to contributing to Vietnam’s energy transition towards carbon neutrality, he said.

The factory is also Idemitsu Kosan's first step towards building a supply chain of three million tons of green energy pellets for the Pacific region a year, and also marks 50 years of Vietnam-Japan relations (1973-2023), Hirano added.

Speaking at the opening ceremony, Pham Truong, Secretary of Hoai Nhon town’s Party Committee, said the town earned $73.47 million from exporting wood products in 2022, or 33.63% of the town’s total export revenue last year. Binh Dinh is among the top four wood processing hubs in Vietnam, according to Truong.

In the first seven months of this year, Binh Dinh exploited 599,403 cubic meters of wood, up 2.3% year-on-year, according to provincial data. From January-July, the province recorded 21 cases of deforestation, totaling 5.5 hectares, up 23.5% but down 23.6% year-on-year, respectively. Besides, it planted 1,122 hectares of forest in the period, doubling year-on-year.

In the seven-month period, Binh Dinh recorded an export revenue of $851.8 million, down 13% year-on-year. Of which, wood products accounted for $225.4 million, down 29.5%.

The number of wood pellet exporters in Vietnam fell from 152 in 2022 to 119 in May 2023 as exports to major markets Japan and South Korea reduced significantly, the Vietnam Timber and Forest Product Association (Viforest) noted in its January-June report.

South Korea and Japan were the two largest export markets for Vietnam’s wood pellets, accounting for 95% of export revenue, the association added. Vietnam earned $151.06 million from exporting 871,356 tons of wood pellets to Japan in the first five months of this year, according to the report.

The Japanese market is considered much more stable than the South Korean market with long-term orders of 10-15 years and exporting prices of $145-165 per ton. The demand for pellets in Japan is expected to grow strongly soon, from eight million tons at the moment to 20 million tons in 2030.

In June, Itochu Corporation, a Japanese multi-sector business, expressed its intention to plant a timber plantation and build a wood pellet factory in the central province of Binh Dinh, aiming to export one million units a year. Kenji Tanaka, Itochu CEO for Asia and Oceania, said the project, in cooperation with Binh Dinh-based Phu Tai Bio-Energy Corporation, aimed to serve Japan’s growing demand for wood pellets, which is estimated to double in three years.