HANOI – Local producers of wood pellets have been lost in dismay as companies in South Korea, a major pellet importer of Vietnam, have stopped buying the product.

By the end of last year, Vietnam had become the biggest wood pellet supplier of Korea with its shipments twice as big as those of Canada, the second biggest provider of Korea, said Nguyen Dinh Quan, chairman of the Southern Wood Pellet Club.

Korea mainly imported wood pellets from China, Malaysia and New Zealand before 2010, and started purchasing the product from Vietnam in 2011. In 2013, enterprises in South Korea increased wood pellet imports from Vietnam after their government had a policy to raise the ratio of biomass power in the country’s total new and renewable energy to 30% in 2030 from 6% in 2007.

However, a halt in shipments of wood pellets to South Korea since last December has led to a sharp fall in prices and a upsurge in inventories.

Explaining the suspension, Quan said the supply of pellets in the Korean market has outpaced the demand due to a large volume of pellet imports in previous years.

On the other hand, Korea has extended the deadline for shifting to renewable energy by five more years, resulting in a drop in the demand for using wood pellets among other renewable energy there.

The surge in wood pellet producers in Vietnam is also to blame. Data of the wood pellet club shows there were 150 firms active in this sector in 2012-2013 but the number soared to 400 last year with combined output of 200,000-300,000 tons per month.

As of September last year, Vietnam had exported nearly 500,000 tons of wood pellets worth US$170 per ton to Korea. After that, that market reduced shipments from Vietnam, throwing local wood pellet firms into a difficult position. Many of them have stopped operations.

To find the way out of the roadblock, local enterprises are encouraged to explore opportunities in new export markets, including China, Japan and Europe as well as the home market.

Nguyen Khanh Ha of the Vietnam Wood Pellet Association expected wood pellet producers can sell up to one million tons to households a month based on the number of some 12 million cookers fueled by coal and wood in the country.

“This is a big market for wood pellets,” Ha said.