Vietnam wood pellet - Outlook for 2026

1 day ago
2 min read

Updated: 2 hours ago

Export growth driven by Japan; rising supply pipeline raises medium-term risks

Coverage: Vietnam | Biomass | Wood Pellet

Key takeaways

Vietnam pellet exports +[...]% YoY in 2025, driven primarily by Japan (+41% YoY)
South Korea demand contracted sharply (-36.7% YoY), marking structural decline
Capacity expansion accelerating (+[...]mt since end-2023), with further pipeline ahead
Export concentration risk rising as Japan share increases to ~74%

Export dynamics

Vietnam’s pellet exports maintained strong growth in 2025, albeit with clear divergence across markets.

Total exports: [...]mn tons (+[...]% YoY)
Export value: USD [...]mn (+[...]% YoY)
Growth momentum weakened in 2H2025 amid softer prices and demand normalization

By market:

Japan: +41% YoY; now dominant export market (~74% share)
South Korea: -36.7% YoY; 5 consecutive quarters of decline
EU: remains marginal, no material growth contribution

View: Japan continues to anchor demand in the near term, but increasing reliance creates structural vulnerability.

Demand drivers: Japan vs. Korea divergence

Demand trends remain policy-driven, with clear divergence between the two key markets.

Japan

Supported by existing FIT/FIP biomass projects
Stable import demand in 2025
Medium-term growth expected to slow as new imported-fuel projects lose incentives

South Korea

Demand structurally weakening
Driven by:
- REC (Renewable Energy Certificate) cuts
- Shift toward domestic feedstock
Import demand continues to decline

Implication: Vietnam exporters are increasingly exposed to a single-market demand structure.

Supply expansion & Industry structure

Capacity expansion accelerated significantly over the past 12–18 months.

Total capacity: ~7.7–8.0mn tons
Increase of >[...]mn tons since end-2023
[...] producers in operation

Pipeline:

Additional ~[...]mn tons (10+ projects) expected from late-2025

Industry trends:

Large-scale players expanding (e.g., emerging biomass ecosystems)
Geographic shift toward Central/North (closer to plantation resources)

Implication: Competition is set to intensify over the next 2–3 years.

Cost & Raw material dynamics

Feedstock availability remains a key structural constraint.

Plantation forest area: ~4.8mn ha
Harvested wood output: ~25.2mn m³ (+5.3% YoY)
Certified forest coverage improving but still limited (~15%)

Key trends:

Raw material supply growing but at slower pace
Increasing competition across wood processing segments
Imported timber still accounts for ~20–30% of demand

View: Feedstock constraints may limit effective capacity utilization despite expansion.

Price trend

Global pellet prices +[...]% YoY in 2025
However, prices softened in Q4/2025

Drivers:

Short-term support from energy market volatility
Increasing supply from Southeast Asia

Outlook:

Near-term: relatively stable
Medium-term: downside risk from oversupply and policy normalization

Outlook (2026–2027)

Demand: Stable (Japan), declining (Korea)
Supply: Strong expansion continues
Price: Gradual normalization / downside risk
Margin: Increasing pressure

Key risks:

Further policy tightening in Korea
Slower-than-expected Japan demand
Faster capacity ramp-up in Vietnam and Southeast Asia

Bottom line

Vietnam’s pellet industry remains in a growth phase, supported by strong Japan demand. However, rising capacity and increasing market concentration are creating medium-term risks, particularly as Korea demand weakens structurally.

Data preview

Metric	2025	YoY
Export volume (mn tons)	6.68	+12.9%
Export value (USD mn)	961.6	+20.8%
Japan growth	—	+41%
Korea growth	—	-36.7%
Total capacity (mn tons)	—	up [...]mt vs end 2023