This short white article will explore the Vietnamese wood sawdust and wood pellet export industry. With the growth in wood pellet exports from Vietnam going from almost zero to about 2.75 million tons per year in 7 years. The question is: What is the limit to growth for that country? One corollary to that question is: What will be the future costs, and hence future prices, for tablets made in Vietnam and shipped to Korea and Japan?

This analysis is based on several sources including the main ones developed by FutureMetrics. FutureMetrics expert, John Swaan, provided design and equipment selection guidance for a new pellet mill in Vietnam. He will soon begin the training of operators of 120,000 tons/year for the pellet plant in Vietnam. FutureMetrics’ work in Vietnam has provided some insight into how tablet prices fluctuate in developing manufacturing markets. FutureMetrics also drew on several international trade data sources for this analysis.

The traditional Vietnamese pellet industry is based on the use of manufactured furniture by-products. Saw and milling dust from furniture factories has dried and is usually of a particle size small enough that further reduction in size by wetting is not required. Previously, Vietnamese pellet mills did not have dryers or particle size reduction equipment. So they have lower capital costs and lower operating costs. Combined with low labor costs, the Vietnamese pellet industry has a history of low production costs.

The high volume of container shipments coming from Korea and the low volume of container shipments from Vietnam to Korea have enabled pellet manufacturers to take advantage of excess empty containers at very low freight rates per ton. low for Korea. Traditional prices are less than $10/ton and sometimes much less.

Prices of Vietnamese Wood sawdust and Wood pellet delivered to Korea and Japan will continue to trend higher

First, shipping costs are likely to increase. The rapid increase in demand for containers for pellet shipments from Vietnam to Korea has reduced the imbalance between inbound and outbound freight. As excess decreases, shippers gain more leverage in pricing. With the current rate of bulk cargo shipping, we expect that freight rates, especially for Japan, will rise above $20/ton.

Second, low-cost production conditions in Vietnam are also changing. The availability of sawdust and low cost and drying from furniture factories is close to or limited to current furniture production levels and this has caused competition among furniture manufacturers. pellets for raw materials.

The furniture manufacturing industry in Vietnam has grown rapidly over the past decade: from exports of about $2.1 billion in 2006 to about $7.2 billion in 2016. That is an annual growth rate of 13%. . Compare that to the 61% annual growth rate for the Vietnamese pellet export industry from 2013 through estimated exports in 2018 (from 160,000 tons to 2.46 million tons).

The demand for furniture manufacturing surplus has grown many times faster than the residue supply industry.

As pellet production levels increase, Vietnamese producers will become increasingly dependent on forest residues, forest thinning and other logs. These pellet sources are more expensive to purchase and require removal, chipping, drying, and wetting before being compressed into pellets.

As wood production in Vietnam increases, the cost of pellet production in Vietnam will also increase.

The increase in the price of Vietnamese pellets is obvious. FutureMetrics estimates the actual price of wood pellets imported into the main importing countries from international trade data 3. Most of the pellets from Vietnam are exported to Korea and Japan.

The first chart below shows two lines. It shows FutureMetrics’ estimate of the market share by weight of pellets delivered to Korea from the top six suppliers (including Vietnam) as the green line, and the price from Vietnam as the line. Red. Because Vietnam dominates the Korean market share, the price of Vietnamese pellets also dominates the aggregate average price. The market share of Korean suppliers is shown on the second chart.

Vietnam dominates the Korean market with 5 other suppliers having 20% ​​or less market share. As the chart above clearly shows prices, Vietnam’s price increase is pushing the average cost onto Korean buyers. FutureMetrics expects to see the Korean pellet import market become more diversified as production costs in Vietnam converge with production costs in other jurisdictions that also have to produce pellets from logs. ; means chipping, drying, and wetting the wood fibers before compacting them into pellets.

Japan’s import market also reflects Vietnam’s price increase.

The import of pellets into Japan is almost entirely from Canada and Vietnam. The chart below shows FutureMetrics’ estimate of the weighted market price for pellets delivered to