Foreword
This short white paper will explore the Vietnam grain export industry. In the past seven years, Vietnam's grain exports have grown from almost zero to about 2.75 million tons per year. The obvious question is: What will limit Vietnam's growth? The inevitable result of this problem is: Vietnam What are the future costs and prices of pellets sold to Korea and Japan?
This analysis is based on several sources, including the main sources of information developed by FutureMetrics.
John Swaan, an operations specialist at FutureMetrics, has been providing design and equipment selection guidance for the new pellet plant in Vietnam. He will train new operators of the 120,000-ton pellet plant. FutureMetrics' work in Vietnam also includes the pellet manufacturing market. Development provided some insights and also used several international trade data sources for analysis.
The Vietnamese pellet industry has traditionally been based on the use of furniture manufacturing by-products. Sawdust from furniture factories has been dried and usually has a sufficiently small particle size that does not require further reduction by hammer grinding. Many early Vietnamese pellet plants did not have dryers or grain sizes. Cutting equipment. Therefore, they have lower capital costs and lower operating costs. Combined with low labor costs, the Vietnamese pellet industry has a history of low-cost production.
A large number of containerized cargo from Korea and small batches of containerized cargo from Vietnam to South Korea enable pellet producers to ship to South Korea with excess empty containers with very low transport rates per ton. Traditionally, prices are below $10/ton, and sometimes even lower.
Vietnam pellet prices sold to South Korea and Japan will continue to rise
First, freight rates may rise. The rapid growth in demand for pellet shipping containers from Vietnam to South Korea reduces the imbalance between incoming and outgoing shipments. As the number of excess containers declines, shippers have a significant impact on pricing. Current bulk freight charges, we expect freight, especially in Japan, to exceed $20/ton.
Second, the conditions for low-cost production in Vietnam are also changing. The availability of low-cost and pre-dried sawdust from furniture factories approaches or reaches the limits of current furniture production levels, which has led to pellet producers' competition for raw materials.
Vietnam's furniture manufacturing industry has grown rapidly over the past decade: from about $2.1 billion in exports in 2006 to about $7.2 billion in 2016, with an average annual growth rate of 13%. In contrast, Vietnam's pellet export industry from 2013 The annual growth rate will be 61% by 2018 (from 160,000 tons to 2.46 million tons). Demand for furniture manufacturing waste is growing many times faster than the industry that supplies waste.
As the level of pellet production increases, Vietnamese producers will increasingly rely on forest waste and other roundwoods. These pellet raw materials are more expensive to purchase and require peeling, cutting, drying and hammering before being densified into pellets. mill.
As Vietnam's production increases, the cost of producing granules in Vietnam will also increase.
It is clear that Vietnamese pellet prices are rising. FutureMetrics estimates the actual price of wood pellets imported into major importing countries based on international trade data. Most of the exported Vietnamese pellets are shipped to South Korea and Japan.
The first chart below shows two lines. It shows FutureMetrics' valuation of the weighted price of particles shipped from the top six suppliers (including Vietnam) to South Korea, which is the green line, while the price in Vietnam is the red line. South Korean market share, Vietnam pellet prices also dominate the weighted average price. The market share of Korean suppliers is shown on the second chart.
Vietnam dominates the Korean market, with the other five suppliers having a market share of 20% or lower. As shown in the above chart, the price is obvious, and the increase in Vietnamese prices has pushed up the average cost of Korean buyers. FutureMetrics expects the Korean pellet import market to change. More diversified, because Vietnam's production costs are related to the production costs of other jurisdictions, and these jurisdictions must also produce roundwood pellets; this means cutting, drying and hammering wood fibres before densification into pellets.
The Japanese import market also reflects the rise in Vietnam's pellet prices. The particles imported into Japan are almost entirely from Canada and Vietnam. The chart below shows the estimate of the weighted price of FutureMetrics for shipments from Canada, Vietnam and Vietnam only to Japan. As shown in the picture, Canada's market share in the Japanese market is about 65% to 70%, which is consistent over the period analyzed.
The data shows that the price of Vietnamese granules shipped to Japan has bottomed out. As mentioned above, as Vietnam's granule production increases, the marginal cost of production will also increase. As in any other granule production area, the inherent use of green wood to produce granules The cost is higher than the production of granules from already dried materials.
What is the growth bottleneck of the Vietnamese pellet industry?
Quantifying the potential particle production capacity of the Vietnamese forest products industry requires a special study and many assumptions about the wood chip and furniture market. At a higher level, FutureMetrics has developed indicators to illustrate the potential bottlenecks in the growth of the Vietnamese pellet industry.
A brief look at the comparison of Vietnam's area with the total tonnage of Vietnam's grain exports, and comparing it with the two states that produce the most grain in the United States (Georgia and North Carolina), we can compare Vietnam with the two states. Relative production intensity.
As shown in the table below, Vietnam's grain exports have grown rapidly this year, increasing the intensity from 8 tons/km2 to 13.4 tons/km2.
According to the expected export volume in 2018, Vietnam will exceed the total of Georgia and North Carolina in 2018.
Calculate production intensity based on the square kilometers of the state or country. Regardless of whether the land is forested or not, the following results are obtained by comparing the production level with the per plant hectares that may be used in the forest products industry.
Through this measure of production intensity, Vietnam's wood pellet export industry has surpassed Georgia and North Carolina. This measure does not consider other forest products industries that require forest materials. It has a high concentration of pulp and paper mills or engineered wood products factories ( For example, areas of OSB and MDF) may have low particle production strength (based on particles produced per hectare of woodland), as a significant proportion of wood is not used for pellet production.
The table below shows the strength of the US states, the green bar indicates. Nothing is higher than Vietnam.
The table is classified by hectare and may provide materials for the forest products industry. Those with higher hectares of potentially available forest but lower yields of wood pellets may already have high demand for wood fibres in other industries, may face challenges, or they may May be a candidate for new export capacity. Please note that Maine is not on the list.
As in other regions, the first export-oriented industrial pellet fuel plant was developed to provide the best combination of raw material costs and plant-to-port logistics. With the development of the industry, both in the US and in Vietnam, the new plant Wood and/or logistics costs may be higher than existing pellet plants. The main difference is that the United States and Canada have a larger area of potential forest land.
Conclusion - What does this mean for the future of the Vietnamese pellet export industry?
In a country bordering 75 percent of the total area of Georgia and North Carolina, Vietnam's continued growth must push the granules produced per hectare of forest faster. In 2018, it is estimated that Vietnam will produce Georgia. And 86% of the total particle size of North Carolina.
As Vietnam launches more pellet projects, Vietnamese pellet producers will intensify competition for raw materials. As the cost rises, the average price of Vietnamese pellets will rise. As the price approaches the equilibrium price of the global market, Vietnam's pellet export industry The scale will tend to be stable.
The rise in Vietnamese pellet prices has proven that rising production costs will change the Vietnamese pellet industry. We look forward to seeing three trends.
(1) There will be mergers. The carefully constructed and well-located pellet plant will be acquired by a few major producers. Over time, the less competitive pellet plant will close down.
(2) The new pellet plant will be world-class in terms of design, equipment and operations. They will produce high quality pellets using materials with a strong sustainability certificate.
(3) Like the major exporters in the West, Vietnamese pellet producers will match the capabilities of long-term off-take agreements. South Korea's policies will evolve to support long-term supply agreements, or more Vietnamese production will eventually be sold under long-term supply agreements. To Japan.
The final size of the Vietnamese pellet production industry is uncertain. However, the current production intensity is likely to push the industry to the limit of the current pellet market price. But regardless of the final capacity, the Vietnamese pellet industry will continue to grow into a world-class production. Like all world-class producers, they will compete in the market for raw materials competition at the price level of the inherent cost of producing pellets.
