A typhoon has caused strong winds, heavy rain and floods in central and north Vietnam, affecting wood pellet producers in the region. Typhoon Kajiki made landfall in the Nge An and Ha Tinh provinces on 25 August.
A wood pellet producer and exporter based in Hanoi has reported "considerable damage" to their facilities. This includes a key production hub in central Vietnam, which supplies wood pellets for seaborne exports to Japan.
The producer's employees were also unable to travel to their offices because of the typhoon, causing disruptions to their operations, a market participant said. A significant number of wood pellet production sites were also forced to halt operations temporarily. The producer is currently evaluating the extent of the damage and impact on production volumes and overall supplies of wood pellets.
Another wood pellet producer reported little impact to its factory in the Nge An province. But it is worried about raw material supplies, which are usually limited during rainy weather. The typhoon also caused floods and damage to roads and ports in Hanoi, which disrupted the producer's operations in the region.
Weak Japanese demand
Wood pellets sold to Japan, which are usually more expensive and certified for Japan's feed-in tariff (FiT) market, mainly use wood chips from lumber processing as raw material. These are usually sourced in north and central Vietnam.
The disruption in wood pellet supplies could provide some support for Vietnamese wood pellets usually sold to Japan. But Japanese demand for wood pellets has been weak following the shutdown of biomass-fired power plants in the country.
Some Japanese plants may likely resort to wood pellet supplies from other markets and other biomass products, if Vietnamese wood pellet prices rise. Japanese biomass buyers have instead been active in procuring palm kernel shells (PKS) because of cheaper prices, and issued more term contracts for PKS supplies in 2026.
PKS prices for supplies compliant to Japan's FiT requirements averaged $93.73/t fob east coast Sumatra in July. This nets forward to an average power price of $98.57/MWh cif Japan on a 30pc power plant efficiency.
The price of wood pellets meeting Japan's FiT requirements averaged $150.13/t fob Vietnam in July. This translates to $127.16/MWh cif Japan for a plant operating at 30pc efficiency.
Biomass-fired electricity is sold under Japan's FiT scheme by most power plants at a fixed price of ¥24/kWh ($0.16/kWh), or around $160/MWh.
