Vietnam’s wood pellet industry needs production standardization to meet global demand: experts
Businesses should invest in developing dedicated raw material zones to reduce the Vietnamese wood pellet industry’s reliance on secondary supply sources and ensure compliance with legality and sustainability standards, said an expert.

Wood pellets. Photo courtesy of VL IMEX Co, Ltd.
Prof. To Xuan Phuc, a senior policy analyst at Forest Trends - a U.S. based international non-profit organization - made the recommendation as Vietnam's wood pellet industry is facing major barriers despite its export revenue nearing $1 billion annually.
In H1/2025, Vietnam exported over 3.9 million tons of wood pellets, generating $564.77 million in revenue, up 33.3% in volume and 38.8% in value year-on-year, according to the Vietnam Timber and Forest Product Association (Vifores).
Japan and South Korea remained the two key export markets for Vietnam’s wood pellets. In 2024, Japan accounted for 60% of export volume and 65% of export value, while South Korea contributed 34% and 28%, respectively.
Average export prices reached $144.3 per ton for Japan and $109.2 per ton for South Korea. Notably, since September 2024, prices to South Korea have risen significantly, driven by improved tender prices and a shortage of wood processing materials.
Risks arising from heavy reliance on key markets
Reliance on these two markets offers advantages in terms of geographic proximity and biomass energy incentive policies, but also carries risks, as demand may fluctuate in response to policy shifts or global energy trends, the government’s news portal said.
Phuc pointed to a host of challenges to the industry, including dependence on secondary supply from other wood processing sectors, rather than dedicated raw material zones.
This makes pellet production vulnerable to seasonality, fluctuating residue prices and supply instability, especially as demand from Japan continues to grow, he explained.
Another obstacle lies with product quality, he said, adding that despite efforts by producers to reduce impurities, chemical residues and metal content in pellets remain significant concerns - directly linked to input material quality.
Nguyen Thanh Phong, head of the Vietnam Wood Pellet Sub-Association under Vifores, further explained that that removing bark can help meet quality standards, particularly in Japan, but would significantly raise production costs.
It would surpass the current export price of around $144 per ton, making it difficult for businesses to remain viable, he said.
Another challenge stems from increasingly stringent quality and sustainability requirements in export markets, the news portal cited experts as saying.
South Korea has recently tightened quality standards, pushing up export prices, while Japan demands FSC (Forest Stewardship Council) and PEFC (Program for the Endorsement of Forest Certification) certifications and is gradually adopting the SBP (Sustainable Biomass Program) standard for low-emission supply chains.
Looking ahead, Japan may follow the European Union’s lead with the Deforestation Regulation (EUDR), which mandates strict traceability - something many Vietnamese producers are not yet prepared to meet.
Another major risk arises from the industry’s heavy dependence on Japan and South Korea, which together account for 94-96% of Vietnam’s total wood pellet export volume and value.
Therefore, any policy shift or rise in competition could leave the industry in a highly vulnerable position.
Finally, the absence of industry coordination and a cohesive development strategy remains a critical weakness. The sector is highly fragmented, with large players accounting for 70% of exports while smaller producers operate in isolation.
Fierce competition over raw materials and buyers - exacerbated by price dumping in the South Korean market - has pushed pellet prices to record lows, leaving many businesses operating at a loss.
Fierce competition
Apart from internal challenges, the industry is under growing pressure from emerging competitors such as Thailand, Indonesia, and Malaysia. These countries are offering higher-quality pellets at more competitive prices, threatening Vietnam’s foothold in key markets like Japan and South Korea.
In the short term, long-term contracts offer Vietnamese exporters some stability. But over the long run, failure to improve quality and meet sustainability standards could cost the industry its competitive edge, according to the news portal.
Widespread price undercutting, particularly in the South Korean market, has damaged the reputation of Vietnam’s wood pellet industry.
In 2023, prices fell below production costs, pushing many producers into financial distress and setting a precedent for unhealthy competition. This not only hurt Vietnam’s national image but also eroded the market value of its pellets relative to regional rivals.
Tran Quang Bao, director general of the Vietnam Administration of Forestry under the Ministry of Agriculture and Environment, noted that the forestry sector is promoting deeply processed, high value-added wood products, including wood pellets.
The processing and production of wood pellets aligns with Vietnam’s circular economy development strategy, he said.
The official stressed that in 2024, Vietnam and Japan signed an MoU on forestry cooperation, covering sustainable forest management, legal wood sourcing, and lawful timber trade.
Therefore, raw materials used in the production and processing of wood pellets must comply with regulations on legal origin, he said.
Phuc suggested that cooperative ecosystem among businesses that share sustainable raw material sources across multiple product lines offers a viable path forward.
At the macro level, there needs to be supportive policies such as planning the wood pellet sector within the broader wood ecosystem, providing incentives for biomass energy, and controlling unfair competition.
These measures would help create a sustainable development environment and enable businesses to compete effectively both domestically and internationally, he said.
Improving quality, building brand identity, and diversifying markets beyond Japan and South Korea - such as expanding into the EU - are strategic steps for the wood pellet industry to assert its position, Phuc added.
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