The rapid growth, said speakers at a recent business forum in Hanoi, can be attributed to an increasing world demand for inexpensive renewable energy, especially from China and the low levels of capital, technology and labour needed to form and operate a wood pellet factory.
In addition, the industry has benefited from government policies amenable to growth such as convenient licensing procedures and exemption from export taxes, said representatives of the Ministry of Agriculture and Rural Development (MARD).
The fact that the rate of past growth experienced is not sustainable has been the subject of much debate and discussion over the past five years, said Deputy Minister Ha Cong Tuan of MARD.
It is generally understood by those in government and the industry that wood pellet factories are in competition not only with one another but with other segments of the economy such as furniture and paper for raw materials, said Deputy Minister Tuan.
In line with the Vietnam Forest Sector Development Strategy through 2020, he said, the government has been giving effect to policies to not just cap but reduce the export of raw wood pellets and guide it towards more sustainable development.
To cut back on the proportion of wood pellets in the export structure one of the steps taken has been to levy a tariff at a rate of 2% per metric ton on exports. The 2% calculates out to roughly US$2.5 per metric ton.
Dang Viet Quang, a representative of Forest Trends, an international non-profit organization promoting sustainable forest management practices, in turn pointed out that the government’s policies are having some positive effect in cutting back on the number of domestic factories.
According to the latest available figures, there are now 64 domestic word pellet manufacturers whereas last year at this time there were 101, which is a step in the right direction to developing a more stable industry, said Mr Quang.
Exports of wood pellets in the five months leading up to June of 2016 dropped 58% compared to the same five-month period in 2015, tallying in at US$248 million, according to the Vietnam Timber and Forest Product Association.
This puts the industry on track for exports of right at seven million metric tons with US$600 million of revenue for the year, down 60% in volume and 50% in value compared to last year.
These reduced levels of timber harvesting, says the Association, in tandem with enhanced forest management practices and continued comprehensive legislative reforms have the wood pellet industry moving briskly towards a more sustainable future.