The Vietnamese wood pellet industry: significant challenges and new opportunities

On September 26, 2025, the 2nd Term Congress (2025 – 2030) of the Vietnam Wood Pellet Association was held in Quy Nhon Ward, Gia Lai Province, with the participation of numerous members (primarily businesses operating in the wood pellet industry) along with representatives from the Vietnam Administration of Forestry and Forest Protection Department, the Department of Agriculture and Environment; the Vietnam Timber and Forest Products Association, the Binh Dinh Timber and Forest Products Association, and representatives from several organizations such as Forest Trends.

Photo 1: Delegates attending the congress

Source: Vietnam Wood Pellet Association

This event marks a new development for the wood pellet industry in its process of integration and sustainable development. At the Congress, delegates heard and approved the Summary Report for Term I (2022 – 2025), discussed, and agreed upon the directions and tasks for Term II (2025 – 2030). The Association's member businesses elected the new Executive Committee and Inspection Committee, and also exchanged views on the opportunities and challenges of Vietnam's wood pellet market.

During Term I, the Association implemented many important activities: supporting and protecting members' rights, participating in policy feedback, organizing conferences and seminars, promoting trade, and connecting with domestic and international partners. The Executive Committee also regularly received and analyzed information from the international market, promptly relaying it to members to adjust production and business operations accordingly. The Association's Executive Committee also encouraged members to strengthen cooperation, sharing, and mutual support to build a united, strong association, and develop together.

Photo 2: Mr. Nguyen Thanh Phong, Chairman of the Vietnam Wood Pellet Association, re-elected for Term II

Source: Vietnam Wood Pellet Association

For Term II (2025–2030), the Vietnam Wood Pellet Association aims to develop the wood pellet industry sustainably and responsibly, aligned with national economic, environmental, and social goals. Specifically, the Association's members are oriented towards development to:

• Strive to achieve a wood pellet export value of approximately 1 billion USD, contributing about 10% to the export value of the timber industry in the coming years.
• Promote the development of cooperation programs and movements, fostering linkages among companies in the industry to create value chain connections, where each company produces its advantageous products, thereby enhancing solidarity to build competitiveness for Vietnam's wood pellet industry.
• Collaborate with provincial and city People's Committees to mobilize afforestation efforts to create suitable raw material areas for industry development, and coordinate with stakeholders to assess and improve certified sustainable forest management areas, thereby enhancing the value of Vietnam's planted forests as well as products derived from them.
• Actively participate in social work, charitable activities, supporting and assisting compatriots and ethnic minorities living in mountainous regions and areas with special difficulties.
• Strive to build a united and reputable Association based on a strong, cohesive Executive Committee. Fully leverage its pivotal role, supported by members, the Vietnam Timber and Forest Products Association, central and local governments, and domestic and international partners.

Currently, Vietnam's wood pellet industry is facing numerous challenges in its production and export activities. In the first 8 months of 2025, wood pellet exports reached 5.46 million tons, valued at 795.9 million USD – increases of 43.3% in volume and 57.4% in value, respectively, compared to the same period in 2024, primarily due to strong demand from Japan. Regarding export market structure, Japan and South Korea remain the two most important markets, accounting for 93.9% of Vietnam's total wood pellet exports. Export volume in 8M/2025 to Japan reached 4.1 million tons, an 83.8% increase, while exports to South Korea reached 1.1 million tons, a 21% decrease compared to the same period in 2024. Currently, Vietnam accounts for about 65% of total wood pellet exports to Japan. The volume of wood pellets exported to this market in 8M/2025 was 13% higher than the total volume exported in 2024. In terms of value, export turnover in 8M/2025 to Japan reached 604.1 million USD, an 87.6% increase, while to South Korea it reached 137.9 million USD, a 1.4% decrease compared to the same period in 2024. This divergence is due to a new biomass power plant coming online in Japan from late 2024, while wood pellets face fierce competition from Indonesian pellets in the South Korean market.

Photo 3: Mr. To Xuan Phuc shares insights on the current state of Vietnam's wood pellet industry

Source: Vietnam Wood Pellet Association

Mr. To Xuan Phuc (an expert from Forest Trends) stated that domestic wood pellet producers are facing difficulties as both dry and wet raw material sources have declined due to trade barriers from the US on Vietnam's timber industry and adverse weather conditions, particularly the devastation caused by Typhoon Yagi in 2024. The industry faces a significant challenge in securing raw materials for production due to its reliance on by-products from wood processing, especially as wood and wood product exports to the US have decreased after the US government imposed retaliatory tariffs on Vietnamese goods from August 2025. Compared to the booming period of 2022-2023, wood pellet raw material prices have been more stable this year as there has been no raw material competition with wood chips, given that China's paper industry import demand has decreased since late last year. Furthermore, domestic and international regulatory bodies are also tightening requirements for proving the origin of wood pellet raw materials.

In the future, markets will continue to tighten requirements for legality and sustainability. Additionally, wood pellets continue to face opposition from environmental organizations in Japan and South Korea. Therefore, businesses need to strengthen linkages with farming households, local communities, and other businesses to build sustainable and legal raw material areas. Furthermore, businesses also need to enhance cooperation among themselves to establish a circular wood processing supply chain, optimizing input raw materials, aiming to use only waste and by-products for pellets, limiting the harvesting of small timber, and creating added value for the timber industry.

To ensure long-term sustainable development, businesses should prioritize improving product quality to maintain their position in demanding markets such as Japan, aiming for higher value-added products like black pellets. Concurrently, the Vietnam Wood Pellet Association will continue to coordinate with the Vietnam Timber and Forest Products Association and relevant organizations to strengthen advocacy for state implementation of policies supporting the industry, such as deploying financial resources to encourage large timber plantation, creating carbon credits, etc. Additionally, opportunities to mobilize capital from investment funds and businesses interested in investing in this sector can be explored.