- The wood industry maintains a relatively high growth rate and contributes significantly to export turnover.
- Tablets are produced from waste materials of the agricultural, forestry and fishery industry, which are very diverse sources of biomass.
- Wood pellets are kinds of clean energy fuel that can replace coal, gasoline, oil, etc., suitable for the journey of greening and protecting the environment of many countries.
- The forestry sector is continuing to promote the certification of sustainable forest management (FSC), with the goal of reaching 10 million hectares by 2030.
Vietnam’s wood industry recovers after the pandemic
The southern region is known for having many processing and exporting enterprises of wood and forest products. According to data from the General Department of Customs, Ho Chi Minh City, Binh Duong and Dong Nai are the largest furniture manufacturing and processing areas in the country. The total export value of all three regions in the first 9 months of 2021 accounts for 65% of the total export value of the country.
The fourth outbreak of the Covid-19 pandemic has negatively and seriously affected the production and processing activities of wood industry enterprises, especially in the southern regions. Specifically, export turnover of southern provinces from July to September only increased by 32%, halving compared to the increase in the first 6 months of this year (up 60% over the same period). The main reason is that most enterprises only maintain a moderate production according to the “3 places” or “1 road, 2 places” model. The number of workers is limited, and the working productivity is significantly reduced, only 20-25% of the production capacity before the pandemic. All of these have caused a deep decrease in the output of processed wood.
In addition, other reasons can be mentioned as port congestion, lack of containers, high raw materials cost and freight, etc. This has added many significant challenges to businesses. According to the associations, transportation costs increased four times compared to the time before the pandemic took place. A container of goods to the US currently costs from 20,000 to 30,000 USD because of high logistics costs.
Up to now, when the pandemic has been controlled, businesses are trying to adapt and restore production to ensure the source of export goods. Specifically, some businesses still maintain regular contact with their partners, providing information on production status so that customers can be assured of their ability to fulfill orders. This helps the wood industry maintain a relatively high growth rate and contributes significantly to export turnover in the group of agricultural, forestry and fishery products.
According to data from the Vietnam Wood and Forest Products Association, in the first nine months of 2021, the export value of wood and related products is estimated at $10.76 billion, up 30.5% over the same period in 2020. Of which, The US, China and Japan markets are the three largest export markets for Vietnam, accounting for 79.8% of the total export value of this item.
Take advantage of waste products to make profit
According to the Vietnam Wood and Forest Products Association, pellets are in the group of 5 items with the highest export value of the wood industry. Vietnam is currently the world’s second-largest exporter of pellets. This item is forecasted to continue to grow in the trend of using clean fuel globally.
According to data collected by a research group from the Timber and Forest Trends Association, in the first eight months of 2021, the total export volume of pellets remained quite stable, reaching 2.4 million tons (equivalent to 273 million USD in turnover). Although export turnover has decreased compared to the same period last year, wood pellets are still an attractive commodity, which is expected to continue to increase in value in the future.
This material is produced from a variety of biomass sources. Wood chips, shavings, sawdust, scraps, twigs, etc. are all waste products of the wood industry; or crop residues such as rice husks, bagasse, cornstalks, hay stalks, coffee bean husks, etc. In the past, people only used these wastes to grow crops, make fertilizer, line livestock or use plywood, but never thought that they could make a bargain of nearly half a billion dollars with wood pellets.
In the years 2010 – 2014, wood pellets was a very potential wood processing field, which Vietnamese businesses focused on investing in building factories to produce wood pellets for export. Specifically, a lot of waste wood products are treated and sold at a relatively high purchase price of 140 – 150 USD/ton.
In the past 7 years, the production, export and value of finished products of wood pellets have been increasing. Specifically, the volume of exported pellets increased by over 18.2 times, from 175.5 tons in 2013 to 3.2 million tons in 2020. The export value of tablets increased 15.3 times, from nearly 23 million USD in 2013 to 351 million USD in 2020. These are all very impressive numbers that rare “waste” products can bring.
Why does “waste” have an increased potential for growth?
First, this is a kind of clean energy fuel that can replace coal, gasoline, oil, etc., suitable for the journey of greening and protecting the environment. Specifically, the production and export of pellets in Vietnam is mainly to meet the demand for input materials for the development of bioelectricity in Japan and Korea since the earthquake and tsunami. Therefore, Vietnam’s annual export of tablets to these two markets accounts for over 90% of total export turnover. In Japan, pellets are expected to meet 38% of total energy demand by 2030. Some exporters say that the volume of pellets exported to this market could triple by 2024 by 2024. – 2025 compared to present.
According to commitments at the United Nations Climate Change Summit 2021 (COP26), regional corridors need to implement policies to reduce CO2 emissions into the environment. To do that, net CO2 emissions must be zero by 2050. Therefore, using wood pellets as an alternative fuel is a “smart” choice for countries.
Second, the source of input materials is easily found. Usually, the input materials are taken advantage of from the “waste” of the wood processing industry. Taking advantage of this, businesses could “double” their revenue by both producing processed wood and producing wood pellets. Before that, they mainly only made profits from processing and exporting woodworking products such as furniture, raw wood furniture, etc. and also discard waste products such as sawdust and wood chips. However, as soon as it appeared, wood pellets quickly captured the market, bringing in higher profits for businesses.
Third, the production process does not require any advanced techniques, including 5 steps such as crushing, drying, pressing, cooling and packing. And mainly, this process is done by machines. Thus, production facilities can save labor time and labor in the production of wood pellets.
Remove the “knot” to improve the value of wood pellets
Although wood pellets have a good stepping stone for future development, there are still many limitations in this half-billion-dollar “waste” manufacturing and exporting industry.
Wood pellets are a product that can easily be processed from small to large facilities. However, this source of raw materials is sometimes not strictly controlled in terms of quality and legality.
On the business side, production facilities have not yet fully prepared plantation certificates to export high-quality and well-priced pellets to Japan or Europe. Meanwhile, many establishments use mixed materials, poor quality, unfair competition. Therefore, businesses need to screen more carefully input materials.
In addition, the bidding stage to sell goods to thermal power plants in Korea must go through a commercial intermediary, making small and medium-sized enterprises highly dependent on third parties. And this also increases the cost of the process from production to export.
According to the General Department of Forestry, the forestry industry is continuing to promote FSC certification, with the goal of reaching 10 million hectares by 2030. This will contribute to increasing the value of input materials.
Accordingly, the source of wood materials in Vietnam has been improved well through the development of plantation forests, up to now, 75% of the annual demand for raw materials has been actively covered. In recent years, the annual export volume of tablets has reached about 3 million tons, equivalent to 350 million USD in turnover. This number may completely increase if Vietnamese enterprises can remove all the “bottlenecks” and have production plans and business strategies.