1. Executive Summary
Southeast Asia stands at the epicenter of one of the most dynamic shifts in the global renewable energy supply chain. In 2026, the region's biomass pellet market is undergoing a profound structural realignment — Indonesia is rising rapidly as the dominant exporter, Vietnam is defending its ground amid raw material shortages and weather disruptions, and Malaysia is positioning itself as a next-generation producer of premium black pellets and EFB (empty fruit bunch) pellets.
Driven by binding renewable energy mandates in Japan and South Korea — the two largest biomass pellet import markets in Asia — Southeast Asian producers are scaling capacity at an unprecedented pace. Simultaneously, investors from Japan, South Korea, Poland, and beyond are pouring capital into greenfield and brownfield facilities across Indonesia, Malaysia, and Vietnam.
This article provides a comprehensive, data-driven overview of the biomass pellet market in Southeast Asia in 2026: who the key players are, where the capital is flowing, what risks threaten supply continuity, and what the market will look like through 2030.
See also: Learn more about the quality standards of premium wood pellet.
2. Southeast Asia's Role in the Global Biomass Pellet Trade
The global biomass pellet market is valued at approximately USD 14.99 billion in 2026 and is projected to reach USD 27.18 billion by 2035, growing at a CAGR of 6.83%. Within this landscape, Southeast Asia occupies a strategically vital position — not as a major consumer, but as the world's primary production and export hub for Northeast Asian markets.
Two defining trade axes govern the global pellet economy: the East–West axis (North America and Eastern Europe exporting to Western Europe) and a rapidly expanding South–North axis from Southeast Asia to Japan and South Korea. The latter is where Southeast Asia's relevance is most acute.
The region's competitive advantages are structural: abundant agricultural and forestry residues, low labor costs, proximity to key import markets, and improving logistics infrastructure. Southeast Asia's biomass pellet industry market was estimated to exceed 10.219 billion yuan (approximately USD 1.4 billion) in 2024, with year-on-year growth of 15% — a trajectory that has only accelerated into 2026.
3. Market Size and Growth Projections
The Southeast Asia wood pellet market was valued at USD 234.14 million in 2024 and is projected to reach USD 454.73 million by 2032, reflecting a CAGR of 8.7% — one of the highest growth rates of any sub-regional biomass market globally.
Key demand drivers include:
- Japan's Feed-in Tariff (FIT) and Feed-in Premium (FIP) policies, which mandate a specific proportion of biomass in the national energy mix
- South Korea's Renewable Portfolio Standard (RPS), which requires power companies to source a growing share of electricity from renewables, including biomass
- Growing adoption of biomass co-firing in coal plants across both markets
- Japan's projected new generation capacity of more than 200 MW expected to come online by the end of 2026
- Asia Pacific's forecast to contribute 24.8% of global wood pellet fuel market share in 2026
For context: the Asia-Pacific region as a whole accounted for over 45% of global biomass wood pellet fuel consumption in 2026, according to reporting citing IRENA data — making it the single most important demand zone in the world.
4. Country-by-Country Analysis
🇻🇳 Vietnam — The Incumbent Under Pressure
Vietnam has been the dominant force in the Southeast Asian biomass pellet export market for over a decade. The country's installed production capacity reached approximately 3.5 million tonnes per year, and exports peaked at an estimated USD 500 million in 2023. However, 2025–2026 has brought significant turbulence.
The decline in South Korea shipments tells the story clearly. In November and December 2024, Vietnam exported 172,000 and 198,000 tonnes to South Korea, respectively. By the same months in 2025, those figures had fallen to just 68,000 and 88,000 tonnes — a year-on-year decline of 56–61%. Exports to South Korea also fell 46% year-on-year in March 2025.
The causes are multiple and compounding:
- Raw material shortages driven by overextended acacia plantation cycles and increased domestic competition for wood chips
- Weather disruptions — multiple typhoons struck Vietnam in the second half of 2025, damaging stockpiles and delaying shipments; La Niña conditions were forecast to persist through February 2026, threatening further supply disruptions
- Rising production costs making Vietnamese pellets less competitive in price-sensitive tender markets
- Tet holiday seasonality, which historically compresses the supply window and creates post-holiday backlog
Despite these headwinds, Vietnam's capacity is expanding. More than 300,000 t/yr of additional wood pellet capacity is expected to come online by the end of 2026. A major Vietnamese supplier is adding 315,000 t/yr, and a Japanese energy company is building at least five new factories in the country — one with a capacity of 150,000 t/yr already operational.
Vietnam's long-term structural position remains defensible, given its mature plantation estate, skilled workforce, and established logistics corridors. However, the market is no longer accepting Vietnam's supply at any price or condition.
See also: Learn how to choose the right fuel for your wood chip mulch.
🇮🇩 Indonesia — The New Dominant Exporter
Indonesia has executed one of the most striking market share gains in recent biomass trade history. The country overtook Vietnam to become the largest exporter of wood pellets to South Korea in November and December 2025 — a benchmark that would have seemed unlikely even 18 months prior.
Export comparison, November–December 2025 vs. 2024:
| Period | Vietnam (tons) | Indonesia (tons) | Indonesia YoY Growth |
|---|---|---|---|
| Nov 2024 | 172,000 | 56,000 | — |
| Nov 2025 | 68,000 | 105,000 | +88% |
| Dec 2024 | 198,000 | 56,000 | — |
| Dec 2025 | 88,000 | 106,000 | +89% |
The drivers of this surge: lower offer prices, a diverse feedstock base (wood pellets, palm kernel shells, EFB pellets), and aggressive capacity additions backed by Japanese and Korean industrial partners.
Indonesia's domestic biomass co-firing program adds another dimension. The country's electricity strategy projects demand for 8.05 million tonnes of biomass for co-firing by 2030, with new power plants designed to burn up to 30% biomass. This creates a dual market dynamic — domestic absorption alongside export growth — that makes Indonesia's trajectory especially complex to forecast.
Key 2026 developments include:
- G7 & PT Biomassa Energy Group JV: A joint venture targeting 700,000 tpa total capacity, with the first 120,000 tpa EFB pellet plant in Sumatra expected to begin operations in 2026
- Idemitsu: Evaluating construction of black pellet plants in Indonesia as part of the region's 3 million tpa target by 2030
- Aisin Takaoka & Triputra: Began producing biocoke from palm kernel shells in West Kalimantan in December 2025, with current capacity of 15,000 tpa and plans to scale to 90,000 tpa by 2031
- Tess Holdings: Expected to start EFB pellet production in June 2026, with capacity projected to reach 100,000 tpa by 2030
🇲🇾 Malaysia — The Black Pellet Pioneer
Malaysia is charting a differentiated course: rather than competing purely on volume, it is moving up the value chain into black pellets (torrefied biomass) and EFB-derived pellets, which command premium pricing in Japanese and Korean markets.
Key market indicators:
- Malaysian exports to South Korea grew 26% year-on-year in the first seven months of 2025
- As of August 2025, monthly exports to South Korea rose a further 13% month-on-month
- Mieco Manufacturing signed a five-year supply agreement with K-One (Korea) for 160,000–200,000 tonnes per year
Black pellet investment highlights:
- Rainbow Pellet: Launching a pilot black pellet plant using steam-explosion technology (6,000 tpa) in Pahang in March 2026
- Wilhelmina: Operating a TG2 EFB black pellet plant in Kuantan (~17,000 tpa current; capacity expected to exceed 80,000 tpa)
- Kobelco & Samling: Conducting a feasibility study for a black pellet plant in Sarawak, with construction expected to begin in 2026 and a target capacity of 300,000 tpa
One headwind: the Malaysian government removed diesel fuel subsidies in July 2025, increasing transportation costs by an estimated USD 5–10 per ton — a meaningful margin hit in a competitive export market.
🇹🇭 Thailand — Shifting from Exporter to Net Importer
Thailand presents a counterintuitive story. Rather than competing aggressively in pellet export markets, Thai industries are pivoting toward palm kernel shells (PKS) for domestic power generation, effectively turning the country into a net biomass importer sourcing PKS from Indonesia and Malaysia.
Exports to South Korea already fell 46% year-on-year in March 2025. While Thailand may continue to supply niche spot volumes, it is not positioned to replace Vietnam in large long-term contracts in 2026. Its role in the SEA biomass export ecosystem is diminishing.
5. Key Export Destinations: Japan & South Korea
Understanding Southeast Asia's biomass pellet market requires understanding its end markets — and both Japan and South Korea are intensifying their demand.
Japan is evolving toward becoming the world's largest wood pellet consumer, driven by the government's target to raise the share of renewables and the expansion of FIP-supported biomass power plants. Japan is expecting more than 200 MW of new biomass generation capacity to come online by end of 2026. Japanese corporations are not merely buying pellets — they are investing directly in upstream production across Vietnam and Indonesia.
South Korea's RPS mandates that utilities source increasing proportions of electricity from renewables, with biomass co-firing a core compliance pathway. South Korean state-owned utilities and independent power producers (IPPs) have actively diversified their supplier base in 2025–2026, awarding tender volumes to Indonesian and Malaysian sellers that previously went exclusively to Vietnam.
Southeast Asian pellets also flow in smaller volumes to Singapore, where urban waste feedstocks including coffee grounds are being piloted for pellet production — an innovative niche application.
6. Feedstock Landscape: From Wood to Palm Waste
Southeast Asia's biomass pellet industry is fed by an extraordinarily diverse feedstock base — a structural advantage over North American and European producers who are more dependent on a narrower set of wood-based residues.
Key feedstocks in 2026:
- Acacia and rubber wood (Vietnam): The backbone of Vietnam's pellet industry. Wood chips from plantation forests remain the primary raw material, though shortages are tightening margins.
- Empty Fruit Bunches / EFB (Indonesia, Malaysia): The palm oil industry generates more than 15 million tonnes of EFB waste per year across Malaysia alone. Converting this to pellets addresses both waste management and feedstock availability. EFB pellets are the fastest-growing product category in the region.
- Palm Kernel Shells / PKS (Indonesia, Malaysia, Thailand): Widely used for co-firing in industrial and power generation applications. Their growing domestic use in Thailand has created export displacement effects elsewhere.
- Palm Pressed Fiber / PPF (Malaysia): Another palm oil byproduct increasingly directed to pellet production.
- Rice husks (Vietnam): Gaining interest from Japanese buyers as an alternative biomass source.
- Forest waste and sawmill residues: The traditional feedstock base across the region, though increasingly constrained by competition with timber and furniture sectors.
Feedstock moisture content remains a technical challenge: levels exceeding 15% in Southeast Asia reduce pellet efficiency and increase production cost by an estimated 12%, according to market analysis.
See also: Learn how to choose the right fuel for your husk pellet.
7. Emerging Technologies: Black Pellets & Biocoke
The next competitive frontier in Southeast Asia's biomass pellet sector is torrefaction — the process of treating biomass at 200–320°C in the absence of oxygen to produce black pellets (also called torrefied pellets or bio-coal).
Black pellets offer significant advantages over conventional white pellets:
- Higher energy density (comparable to coal)
- Hydrophobic — can be stored outdoors and transported in standard coal logistics infrastructure
- Can be used in higher co-firing ratios without modification to existing coal boilers
- Command a price premium in Japanese and Korean markets
Malaysia is currently the most advanced in this technology within SEA, with multiple plants either operational or under construction. Indonesia, through partnerships with Idemitsu and Aisin Takaoka, is also entering the black pellet space via biocoke — a related torrefied product derived from palm kernel shells.
The transition to black pellets represents a significant value-chain upgrade for the region, potentially unlocking a new premium export tier alongside conventional white pellet volumes.
8. Investment Activity and Notable JV Deals (2025–2026)
The scale of foreign direct investment entering Southeast Asia's biomass pellet sector in 2025–2026 reflects strong institutional confidence in the market's long-term trajectory.
Selected notable investments:
| Deal | Location | Capacity | Status |
|---|---|---|---|
| G7 (Poland) + PT Biomassa Energy Group | Sumatra, Indonesia | 120,000 tpa (Phase 1); 700,000 tpa (total target) | Phase 1 commencing 2026 |
| Aisin Takaoka + Triputra | West Kalimantan, Indonesia | 15,000 tpa → 90,000 tpa by 2031 | Production started Dec 2025 |
| Tess Holdings | Indonesia | 100,000 tpa by 2030 | Starting June 2026 |
| Idemitsu | Indonesia | Part of 3M tpa regional target | Planning phase |
| Kobelco + Samling | Sarawak, Malaysia | 300,000 tpa | Construction from 2026 |
| Wilhelmina | Kuantan, Malaysia | 80,000+ tpa (max) | Operating |
| Rainbow Pellet | Pahang, Malaysia | 6,000 tpa pilot | Launching March 2026 |
| Japanese energy company (undisclosed) | Vietnam | 5 factories; first 150,000 t/yr online | Ongoing expansion |
The common thread: Japanese and Korean industrial and energy companies are securing upstream supply through equity stakes and long-term offtake agreements, reducing their dependence on spot markets and price volatility.
9. Infrastructure Risks and Supply Chain Challenges
Even as investment flows accelerate, the region faces a set of structural and operational risks that could constrain growth:
Port and logistics vulnerabilities were starkly illustrated on January 5, 2026, when a major jetty at Tanjung Buton Port collapsed in Riau, Sumatra — a key biomass export hub. While the immediate impact was concentrated on PKS exports, the incident exposed the fragility of port infrastructure supporting the broader biomass trade. Exporters forced to divert cargo to congested alternative ports like Dumai face cost increases and scheduling delays.
Weather disruptions represent perhaps the most persistent risk. In Vietnam, flooding in late November 2025 damaged pellet stockpiles and delayed shipments. La Niña conditions created elevated rainfall forecasts for Vietnam's north, central, and southern regions through February 2026. In Malaysia, flooding in Peninsular Malaysia from December 2025 through January 2026 disrupted logistics and raw material collection in northern regions.
Feedstock competition is intensifying as domestic industrial users (particularly in Indonesia and Thailand) consume more biomass locally, tightening the export supply pool.
Price pressure is a structural feature of the market. Indonesian pellets are winning Korean tenders on price, compressing margins for higher-cost Vietnamese and even Malaysian producers. The removal of Malaysian diesel subsidies added USD 5–10/ton to logistics costs, further squeezing margins.
10. Sustainability, Deforestation, and Certification Pressures
The Southeast Asian biomass pellet sector faces significant and growing scrutiny over its environmental footprint — scrutiny that increasingly shapes which suppliers can access premium markets.
Environmental NGOs and research organizations have documented evidence of intact tropical forest clearing for biomass pellet production in Indonesia, particularly in Gorontalo province (Sulawesi). Investigations found that meeting Indonesia's domestic co-firing mandate alone could require up to 10.23 million tonnes of wood pellets per year — a volume that, if sourced unsustainably, could drive deforestation rates of up to 2.1 million hectares per year.
From 2012 to 2021, Vietnam's wood pellet production grew from 50,000 to 3.5 million tonnes; Malaysia's from 40,000 to 710,000 tonnes; and Indonesia's from 20,000 to 330,000 tonnes — reflecting an industry that scaled faster than sustainability governance frameworks could adapt.
Certification requirements are consequently rising. Standards such as ENplus and the Sustainable Biomass Program (SBP) now cover over 70% of wood pellet exports globally. Japanese and South Korean buyers are increasingly mandating SBP-certified supply chains, particularly for large long-term contracts. Producers unable to achieve certification will find themselves locked out of the most lucrative market segments.
For investors and media: sustainability risk is not just reputational — it is increasingly a commercial gating factor for market access.
11. Policy & Regulatory Landscape
Japan remains the anchor demand driver through its FIT and FIP systems, with biomass power classified as a supported renewable energy category. The government's ambition to increase renewables' share of power generation provides a clear long-term demand signal for Southeast Asian exporters.
South Korea's RPS continues to mandate renewable energy sourcing, with biomass co-firing a primary compliance mechanism for coal plant operators. State-owned utilities have diversified their Southeast Asian supplier base in 2025–2026, actively reducing dependence on any single country.
Within Southeast Asia, Indonesia's National Energy Policy has set a co-firing target requiring biomass to generate 19.7 TWh by 2025, with the majority coming from coal plant co-firing. This creates both domestic demand and a regulatory framework incentivizing new production capacity.
Malaysia's National Biomass Strategy and Green Technology Financing Scheme (GTFS) have provided the policy scaffolding for investment in pellet production, though subsidy reforms (diesel fuel) have introduced cost headwinds.
Vietnam continues to benefit from strong bilateral trade relationships with Japan and South Korea, and is actively courting Japanese investment for upstream capacity expansion.
12. Market Outlook: 2026 and Beyond
The biomass pellet market in Southeast Asia is not a single story — it is a portfolio of national trajectories, each unfolding at a different speed and risk profile.
Vietnam will likely recover market share as additional capacity comes online in 2026 and weather conditions normalize, but will not reclaim the dominant position it held in 2023. Competition from Indonesia and Malaysia is structural, not cyclical.
Indonesia is the region's growth engine. Its combination of cost competitiveness, diverse feedstocks, growing domestic co-firing market, and deep pockets of foreign investment positions it as the market to watch through 2030. The country's ambition of reaching 3 million tpa of biomass capacity by 2030 is backed by credible investment flows.
Malaysia is pursuing a high-value, differentiated strategy through black pellets and long-term supply contracts. Its success will depend on continued technology investment and managing logistics cost pressures.
Thailand is effectively stepping back from the export market, with domestic demand absorbing the majority of its biomass production.
At the macro level, the SEA biomass pellet market is projected to nearly double in value by 2032, driven by non-negotiable demand from Japan and South Korea. The South–North trade axis connecting Southeast Asian producers to Northeast Asian consumers is one of the most structurally robust commodity flows in the renewable energy sector today.
13. Key Takeaways for Investors and Media
For investors:
- Indonesia offers the highest growth potential but requires careful due diligence on feedstock sourcing, sustainability certification, and infrastructure risk
- Malaysia's black pellet segment represents a premium, differentiated investment thesis with strong Japanese and Korean off-take interest
- Vietnam remains a productive market but requires risk management around weather exposure and raw material supply chains
- Long-term offtake agreements with Japanese and Korean utilities are the most bankable revenue structures in this market
For media:
- The power shift from Vietnam to Indonesia is the defining story of the 2025–2026 biomass pellet cycle in Southeast Asia
- Sustainability and deforestation risk is the sector's most consequential unresolved tension — and a major editorial angle with significant documentary evidence
- The South–North trade axis (SEA → Japan/South Korea) is a story about Asia's energy transition, not just a commodity trade — it connects ASEAN's natural resource economy directly to Northeast Asia's decarbonization agenda
This article was last updated: May 2026. Data sourced from Polaris Market Research, Argus Media, Thang Long Wood Industry, Journal of Asian Energy Studies, Earth Insight / Auriga Nusantara, Econ Market Research, and Coherent Market Insights. Market projections reflect analyst consensus as of the publication date and are subject to revision.
Tags: biomass pellet market Southeast Asia 2026, wood pellet export Vietnam Indonesia Malaysia, EFB pellet Indonesia, black pellet Malaysia, biomass co-firing ASEAN, renewable energy Southeast Asia, wood pellet Japan South Korea trade, biomass investment ASEAN 2026
