January 5, 2022

by woodchip

Export of fuel pellets on the rise

Vietnam exports about 3 million tons of fuel pellets each year with an export turnover of 350 million USD. In the first eight months of 2021, the export volume reached 2.4 million tons, equivalent to 273 million USD in turnover.

Korea and Japan account for over 90% of imports.

The report “Vietnam’s production and export of pellets: Current situation and some aspects to be concerned about” published by Forest Trends in collaboration with the Vietnam Timber and Forest Products Association, in recent years Recently, the amount of pellets exported each year has reached around 3 million tons, equivalent to 350 million USD in turnover.

South Korea and Japan are Vietnam’s two largest fuel pellet import markets, with exports to these two markets each year accounting for over 90% of total exports. The Korean market is larger than the Japanese market. However, the level of stability in the Japanese market is higher.

The average export price to the Japanese market is currently higher than that of Korea, about 20-30 USD/ton on average. Some exporters said that the current low export price to the Korean market applies an auction mechanism when purchasing products, with businesses offering low prices receiving contracts product co-supply. After receiving these contracts, these businesses return to manufacturers in Vietnam and push product prices down low to meet the agreements they have signed with buyers.

The average export price to the Japanese market is currently higher than that of Korea, about 20-30 USD/ton on average. Some exporters said that the current low export price to the Korean market applies an auction mechanism when purchasing products, with businesses offering low prices receiving contracts product co-supply. After receiving these contracts, these businesses return to manufacturers in Vietnam and push product prices down low to meet the agreements they have signed with buyers.

Continuing the growth momentum

Like other industries, Vietnam’s tablet manufacturing and exporting industry has also been negatively impacted by the Covid-19 pandemic. Export turnover and volume have decreased sharply in recent months. Specifically, in June 2021, the export of pellets reached 367.2 thousand tons with a value of USD 41.1 million. However, entering July 2021, this figure dropped to 315.5 thousand tons and a value of USD 41.1 million. Price of 36.7 million USD, in August 2021, export turnover reached 265.2 thousand tons with a value of 31.3 million USD.

Statistical data on export pellets of Vietnam shows that, on average, over 70 enterprises participate in exports each year. The number of businesses participating in this stage has not changed much between 2019 and 2020. However, the number of enterprises participating in the export stage in the first eight months of 2021 is only 59, much smaller than those participating in the export stage in 2020. The decline of enterprises participating in exporting in 8 months The first month of 2021 may be because some businesses will participate in this stage in the last months of the year. It may also be due to the re-emergence of the Covid-19 epidemic in Vietnam.

Mr. To Xuan Phuc, an expert at Forest Trends, said that one of the strengths that directly contributes to the formation and development of the fuel pellet industry is the abundant input materials generated. From wood by-products of the processing industry. Input wood sources for making this item include sawdust, shavings, twigs, and tops of planted timber diameter about 2cm or less. On the other hand, the tablet processing facility does not require extensive and complex investment in management technology, creating opportunities for many enterprises to participate in the production stage. Vietnam has a geographical advantage with raw materials for tablet production near export seaports, convenient for transportation.

However, the tablet manufacturing and exporting industry currently has some limitations. Firstly, input materials have not been strictly controlled regarding quality and legal aspects. Some processing facilities use mixed materials, affecting product quality. The supply of input wood with sustainable forest management certification (FSC) is limited, while the export market’s demand for certified products is increasing. There are some signs of fraud in the claims of FSC-certified products with a larger volume of shares than is available. This information is harming the industry.

Secondly, the industry currently has a situation where supply is more excellent than demand, with enterprises involved in processing significant participation. This leads to fierce competition between businesses, including unfair competition such as price manipulation. Many enterprises are engaged in processing, while the export stage is concentrated mainly on a few large-scale enterprises.

According to information from many business representatives, the price in the Korean market for Vietnamese businesses participating in the bidding process here dropped the low price, then turned back to push the price of products of production facilities. The industry has potentially unsustainable factors in the current supply situation greater than demand.

The fuel pellet industry is forecasted to have room for sustainable development. In particular, the demand for tablets in Japan will continue to increase in the future. According to some exporters, the number of pills in the Japanese market will expand three times by 2024 – 2025 compared to today. If Vietnam’s production capacity is kept at the current level, the supply and demand for this item will balance in the next 2-3 years. On the other hand, this industry can increase the proportion of products with FSC certification, which can be achieved through cooperation between export processing enterprises and afforestation households to generate resources certificated wood.

The average export price per unit of product to Japan is always higher than the export price to Korea. This may cause exporters to move from the Korean market to the Japanese market or try to enter both markets.

To seize opportunities and promote exports, experts say that it is necessary to form a representative organization for industry enterprises such as branch members because this will directly contribute to the regulation of the economy—future production and export activities of the industry.

Accordingly, the representative organization has the role of connecting manufacturing and exporting enterprises, creating a familiar voice among businesses, and regulating the output market of products and at the same time, acting as an information focal point, providing member enterprises with information on product output markets, including information on demand and legal and sustainability requirements for products. Convey information and recommendations from businesses to management agencies to form practical policies and mechanisms, promoting the industry’s sustainable development.

According to Industry and Trade Newspaper