The Vietnamese wood pellet market is likely to face supply volatility in early 2026 due to an adverse weather outlook in the coming months. This could be exacerbated by a busy period to clear shipments before the annual Tet holidays in February, while forecasts of rain in early 2026 could translate to a repetition of the supply shortages seen in 2025.
Rain across the country can make it difficult to harvest raw material including wood chips, putting pressure on wood pellet production. La Nina weather conditions are expected to persist until February 2026 at a probability of 50-60pc, according to forecasts by the country's National Center for Hydro-Meteorological Forecasting (NCHMF). Areas in southern Vietnam are expected to have higher-than-average rainfall at 10-30mm from January-February 2026. Regions in northern and central Vietnam may receive significant rainfall at 15-35mm during the same period. The NCHMF expects the most rainfall in the Quang Tri region in central Vietnam, with forecasts of 50-150mm in January and 40-70mm of rain in February.
Multiple typhoons hit the country in the second half of 2025. Rain and floods were also frequent during this period, damaging wood pellet stockpiles and causing delays to shipments. Significant volumes of wood pellets were damaged by floods in late November. This was akin to weather-related disruptions seen in 2024, which extended to the Tet holidays in 2025. The supply disruptions caused a significant backlog of shipments after the holidays.
Vietnamese wood pellet production capacity is also set to increase in 2026, cushioning the impact of the shortage brought about by supply disruptions in the fourth quarter of 2025. More than 300,000 t/yr of additional wood pellets are expected to meet export demand by the end of 2026.
A major wood pellet supplier plans to generate an additional 315,000 t/yr of capacity by the end of 2026. A Japanese energy company aims to build at least five new wood pellet factories in the coming years, of which one with a capacity of 150,000 t/yr capacity began operations in 2025.
Wood pellet from alternative origins
Wood pellets from origins such as Russia and Canada have historically been the main alternatives to Vietnamese pellets and are generally considered to be of better quality. South Korean annual imports from Canada and Russia in 2025 are projected to rise on the year, much like Canadian wood pellets to Japan. Japan stopped importing from Russia in 2022.
South Korean and Japanese demand for wood pellets from other southeast Asian origins have also increased substantially in recent months, with new volumes coming from Indonesia and Malaysia. Imports from the two countries have risen in 2025, with Indonesia having seen the highest export growth this year among all regions.
This trend is expected to continue into 2026 where South Korean state-owned utilities and independent power producers (IPPs) have awarded more tender volumes to non-Vietnamese sellers, while Japan is expecting more than 200MW of new generation capacity to come on line by the end of 2026.
