The promising picture of investment in wood pellet production technology
In the future, the wood pellet industry is being valued at billions of dollars with extremely strong development from high-demand markets such as Korea, Japan, the US,… [1] In addition, fluctuations in the market economy, especially the disruption of the supply chain of raw materials in the European region, also directly make wood pellet products in Vietnam have more potential to expand scale and grow export turnover in the future. Let’s join RX Tradex to learn about the promising picture of investment in wood pellet production technology in Vietnam in the article below.
1. The picture is promising for investment in wood pellet production technology.
1.1. Overview of wood pellet manufacturing industry in Vietnam.
What is the wood pellet industry in Vietnam today? According to a report of the Vietnam Wood and Forest Products Association just published, in the first 6 months of 2023, wood pellet exports are estimated at 1.85 million tons, reaching a turnover of nearly 300 million USD. In particular, the two largest tablet consumption markets of Vietnam are Korea and Japan, accounting for over 95% of the total export volume to the world. [2]
According to the same report, in the first 5 months of 2023, the amount of wood pellets exported from Vietnam to Korea will reach 0.65 million tons, equivalent to 96.1 million USD. Specifically, wood pellets exported to Korea are mainly made from wood by-products such as sawdust, by-products from planted forest wood, shavings, leftover wood scraps,… Enterprises producing wood pellets to Korea are mainly distributed in the Southeast region, where wood processing factories are concentrated.
For Japan, the report shows that in the first 6 months of 2023, wood pellet exports to this market are estimated at about 1 million tons, equivalent to 173 million USD. In particular, to export, it is necessary to ensure the requirements of partners that the source of wood materials must come from domestic plantations, and must have FSC certificates. Therefore, most wood pellet products exported to Japan come from enterprises in the Central and North of Vietnam.
1.2. Opportunities to develop the wood pellet industry in the future.
What opportunities does the wood pellet industry have for development in the future? According to the research team of Forest Trends and wood associations, the global crisis due to the Russia-Ukraine war has increased the demand for wood pellets in the world market very strongly. [3] This gives the wood pellet industry in Vietnam the opportunity to expand the market. At the same time, consumption demand in Vietnam also began to show strong signals. The reason is that the Government is making efforts to implement commitments to reduce greenhouse gas emissions and use clean energy. In particular, the use of wood pellets will be a plan to replace coal in energy production.
Also according to Forest Trends, it is expected that in the last months of 2023, Vietnam’s wood pellet export situation will not have much fluctuation. With two main markets, Korea and Japan, output as well as export prices will increase according to the current situation. In addition, the competition for raw materials for production shows signs of continuing to increase because the output market for wood products has not shown signs of recovery. Currently, Vietnam is the second largest tablet producer in the world, after the United States.
1.3. Challenges in the production of wood pellets.
What challenges does the wood pellet manufacturing industry face? Along with development opportunities are outstanding difficulties in the wood pellet industry of Vietnamese enterprises. Typically, there is a huge challenge of sustainability, affecting the environment in the production process. Our country needs a long-term strategy for exploitation, to ensure the development of the whole wood processing industry. According to Vietnam Agriculture Newspaper, although our country has more than 4 million hectares of planted forest, it cannot meet the demand for raw materials for the production of all 3 items: refined wood furniture, pellet processing and wood chips. [4]
In addition, Vietnamese enterprises are currently facing competition from emerging regions in the industry such as Malaysia, Thailand and Indonesia. In the future, domestic enterprises need to improve products in accordance with many environmental and quality criteria to ensure competitiveness compared to these direct competitors.
According to VnEconomy, currently the export price of Vietnamese tablets is quite low compared to Southeast Asia. Specifically, the low export price of wood pellets to the Korean market is due to the auction mechanism when buying products. After receiving the contract, businesses will return to Vietnam and push down product prices, in order to meet the contracts they have signed with buyers. Meanwhile, thermal power plants in Japan buy wood pellets by negotiating and signing purchase contracts directly from manufacturing enterprises in Vietnam. And with 10-15 years of market research and research, Japan will often offer higher prices than many other export markets. [5]
1.4. Prospects for investment in wood pellet production technology.
What are the prospects from investing in wood pellet production technology? In recent years, the demand for wood pellets has increased mainly in developed countries such as Europe, Japan, Korea, the United States,… However, to ensure the sustainable development of the wood pellet industry in Vietnam, enterprises need to invest in modern production technology, aiming towards reducing greenhouse gas emissions and using clean energy. In addition, with the Government’s policy of prioritizing the development of renewable energy sources, enterprises need to focus on investing in operating systems, innovating modern equipment to meet green criteria in production processes and finished outputs.
In addition, the investment in technology for wood pellet production also brings great competitive advantages to domestic enterprises. Factories with automated lines and modern management systems will improve product quality, reduce costs and increase revenue for the company.
In addition, to export products to major markets such as Europe, America, Japan,… Wood pellet enterprises need to ensure a lot of criteria for product quality and production process. Since then, the focus on promoting investment and technological innovation in wood pellet production is essential for Vietnamese enterprises to participate in these potential markets.
2. Summary.
Above is RX Tradex’s article on “A promising picture of investment in wood pellet production technology”. Hopefully, enterprises have learned about the overview of the Vietnamese market and the opportunities and challenges of the wood pellet industry today. In addition, this year, businesses wishing to learn more about other production technologies can immediately participate in the Vietnam Manufacturing Expo organized by RX Tradex Vietnam. In addition, in 2023, RX Tradex will also organize leading exhibition events in the region such as NEPCON Vietnam, METALEX Vietnam and Waste and Recycling Vietnam which will take place in 2024.
Note:
[1]: Pellet manufacturing: The billion-dollar industry of the future.
[2]: Tablet exports dropped sharply, Japan and South Korea remained Vietnam’s two main markets.
[3]: Two main export markets of wood pellets in Vietnam.
[4]: Wood pellets, the future and challenges – Vietnam Agriculture Newspaper.
[5]: The tablet industry has many opportunities for growth, but is still fragmented.
