Over the past month, Nghe An Pp Woodchip Joint-Venture Co., Ltd. has collected about 10 tonnes of wood chips for orders from China and South Korea. As of June, the company had an inventory of 2,500 tonnes of wood chips. Pressure is easing as orders have gradually returned with a slight increase in price.

Wood chip groups spreading activities to fresh pastures

Thang Van Hoa, chairman of the Vietnam Wood Chips Branch under the Vietnam Timber and Forest Product Association, said that the sharp decline in wood chip prices has adversely affected businesses, afforestation households, and the export value of the wood industry.

The woodchip processing and exporting industry has become an essential component of Vietnam’s wood industry ecosystem. The annual export volume is about 12 million tonnes, equivalent to 24 million cu.m of raw input logs.

Vietnam’s wood chip exports are expanding mainly due to rising export prices. As of present, the price is easing, with an average of $162.90 per tonne. According to an August 10 report released by the Research Group of Wood Associations and Forest Trends, the export price of Vietnam’s wood chips remained stable in the 2013-2021 period, and the free-on-board export price averaged about $130-140 per tonne.

In 2022, the price surged 40 per cent to an average of $176.2 per tonne due to rising global demand, especially in China.

China is likely to be the key export market for Vietnam’s wood chip industry in the future. The report indicates that China accounts for at least 60 per cent of the export turnover of Vietnam’s wood chip industry, despite the shrinking demand in the market.

“Vietnam’s wood chips exported to China are rebounding again in terms of quantity and export value. There are signs of a strong demand for wood chips in China as input materials for papermaking in the coming time. This presents a great opportunity for Vietnam’s wood chip enterprises,” said Kim Anh, a senior expert from Forest Trend.

Enterprises not only focus on the traditional markets but are also venturing into new ones, with Vietnam recording a surge in wood chip exports to Indonesia. In the first half of 2023, Indonesia imported nearly 235,000 tonnes of wood chips, becoming Vietnam’s fourth-largest import market, behind South Korea.

At the same time, Taiwan has also imported a large amount of wood chips from Vietnam, totalling 105,000 tonnes.

In addition to export opportunities, there is also ample opportunity for wood chips in the local market. Some coal power plants in Vietnam have piloted and partially converted to using wood chips and pellets. This sign indicates a demand for pellets in the local market.

“Demand for wood chips and pellets will increase as the government makes efforts to reduce greenhouse gas emissions and achieve a net-zero goal by 2050,” Anh said.

Forest Trends’ report predicts that the government can create special mechanisms to encourage businesses to switch from coal with high emission levels to cleaner raw materials, including wood chips and pellets. This will create a huge increase in demand for these two items in the domestic market, as well as affect the supply of raw materials at the same time.

The Research Group of Wood Associations and Forest Trends recommends that the competition become fiercer for input materials used in wood chip production for export and domestic consumption. The competition is not only between wood chip enterprises, but also between wood chip enterprises and enterprises using the same input materials as planted forest wood, including pellets and polished boards.

Therefore, Vietnam needs to study in detail these competitive aspects in order to balance and stabilise the source of input materials for these components, the group said.