Although relatively new to Vietnam’s wood-processing sector, wood pellets have rapidly emerged as a high-value export item, reaching nearly USD 400 million in export turnover.
Japan and South Korea – Vietnam’s Two Key Markets
According to the Vietnam Timber and Forest Products Association (VIFOREST), wood pellets are a rising productwithin the country’s wood-export structure. Production and exports have expanded strongly over the past five years, making Vietnam the world’s second-largest wood-pellet exporter, after the United States, with more than 3 million tons exported annually worth roughly USD 400 million.
In 2021 alone, Vietnam exported 3.5 million tons of pellets valued at USD 413 million. Japan and South Korea are the two dominant destinations, absorbing over 95 % of total pellet exports.
Currently, export volumes to both markets are nearly balanced: 56 % to South Korea and 43.8 % to Japan in 2021. However, growth in the Japanese market has been stronger and more stable. Experts predict Japan’s pellet demand could triple in coming years, creating major opportunities for Vietnamese suppliers.
Mr. Đỗ Xuân Lập, Chairman of VIFOREST, noted that while Japan’s pellet price is more stable, Korean prices have risen faster. Early 2020 prices for Korea were just 70 % of Japan’s, yet by the end of 2021 that gap had closed.
“In early 2022, export prices to South Korea climbed sharply. Some suppliers signed contracts at USD 150 – 160 per ton, while Japan’s prices ranged from USD 140 – 145 per ton,” Mr. Lập said.
Limited Raw Material Supply
Vietnam currently has 83 direct pellet-exporting companies and over 300 production facilities. Despite strong foreign demand, the domestic pellet sector remains fragmented and small-scale. Only 8 companies export more than 100 000 tons each per year, accounting for 67 % of total exports, with 3 firms exceeding 400 000 tons and one leading exporter shipping nearly 714 000 tons, or 20 % of national volume.
The main feedstock for pellet production includes:
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Branches and tops of plantation timber,
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By-products from wood-export factories such as sawdust, wood shavings, and offcuts.
Most feedstock is sourced locally, since low margins do not cover long-distance transport costs.
Pellets made from wood-processing residues are concentrated in southern provinces like Bình Dương, Đồng Nai, and Ho Chi Minh City, where many wood-furniture factories operate.
Meanwhile, pellets made from plantation timber residues are produced mainly in the northern and central regions, which have larger forest areas.
As pellets are considered a by-product of wood processing, Vietnamese authorities currently do not require exporters to declare raw-wood origins, though some firms do so voluntarily.
“Several major Japanese importers now require FSC-certified pellets made from wood sourced from sustainably managed forests,” Mr. Lập explained. “Vietnam currently has around 186 000 ha of FSC-certified plantation forest, but only 40–50 % is harvestable, so certified feedstock remains limited, mostly in the north and central regions.”
Expanding Global Opportunities
The Russian government’s March 2022 ban on exporting logs and pellets — in response to European sanctions over the Russia-Ukraine conflict — has disrupted the global pellet supply chain. Russia previously supplied about 2.4 million tons per year. The ban, valid until the end of 2022, has created a supply gap and new export opportunities for Vietnam.
Given strong demand and expanding capacity, wood pellets have become a key export item of Vietnam’s wood industry. The sector is expected to continue growing as global energy markets favor renewable biomass fuels.
To ensure sustainable development, experts emphasize that Vietnam should:
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Strengthen monitoring and traceability for legal wood sources,
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Develop a transparent production and supply-chain management system,
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Encourage FSC certification and green production practices,
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Foster collaboration between pellet exporters and raw-material producers.