Wood pellet exports down but Japan buys more

Japan imported more than 1.16 million tons of pellets from Vietnam for more than $195 million in the first six months, up 5.7% in volume and 28.9% in value year-on-year, respectively.

The increase in exports to Japan took place amidst a general decline in the first half of 2023, according to the Vietnam Timber and Forest Product Association (VIFOREST).

Vietnam's H1 exports of more than 2 million tons with a value of over $325 million was respectively down 12.3% in volume and 8.2% in value over the same time in 2022.

However, the proportion of pellets in the entire export turnover of the wood industry increased from 4.2% in H1/2022 to 5.3% this year, the association said.

South Korea and Japan are two biggest buyers of Vietnam's wood pellets. While the South Korean market bought less this year, the increased purchases by Japan reflected the fact that it is developing many thermal power plants using wood pellets. It also means that Japan’s demand for the pellets will continue to increase in the coming time, the VIFOREST noted.

It said wood pellet purchases from Vietnam in the first six months of this year accounted for 23.5% of the Japan’s total import turnover of wood and wood products from the Southeast Asian country, compared to 18% in the same period last year.

Trends foreseen

VIFOREST has identified five trends in the wood pellets market for the foreseeable future

Firstly, the global wood pellet market will be worth roughly $31 billion by 2030. In Japan, the market for wood pellets is expected to grow roughly three times by the same year.

Secondly, a few US businesses have switched their exports from the EU to Japan because certain Japanese businesses offered favourable rates for fixed-price, lengthy contracts.

Thirdly, the expansion phase of entering long-term contracts for the Japanese market, which began in 2021, is likely to continue. In the first half of 2023, total pellet shipments to Japan from all markets climbed by 50% compared to the same period in 2012.

Fourthly, given the Vietnamese government's commitment to reducing GHG emissions and enterprises' voluntary move to wood pellets from high-emission raw materials, the demand for wood pellets for domestic consumption will also rise in the future.

Fifthly, Erex, a Japanese renewable energy corporation, will start using wood chips alongside coal as fuel at its 110 MW Na Duong plant using 6,000 tons of pellets in the northern province of Lang Son. This will take its biomass utilization rate from the current 5% to 20% in August-September. Erex will also construct a wood pellets factory in the northern mountainous province of Yen Bai that is scheduled to open for business in January 2025.

Last month, 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. The factory in Hoai Nhon town has an annual capacity of 120,000 tons of green energy pellets that will be exported to Japan. The factory is expected to be Idemitsu Kosan's first step towards building a supply chain of three million tons of green energy pellets for the Pacific region a year.