Pellet boom in use and production in east Asia – price is rising

Increases in Vietnam’s wood pellet spot prices accelerated during the third quarter, boosted by strengthening Japanese and South Korean utility demand against a backdrop of tightening supply reports Argus Biomass markets.

The supply-demand balance is expected to remain tight in the final quarter of the year and beyond, with South Korea’s total wood pellet demand expected to exceed 3mn t/yr in 2018, well up from 1.72mn t in 2016, according to forecasts from market participants.

Supply concerns helped to lift the fob Vietnam wood pellet price. The price hit a new 2017 high of $112.90/t fob Vietnam at the end of October, compared with $95.83/t at the start of this year.

Vietnamese wood pellets continued to dominate South Korea’s imports in July-September with a 63pc share, or 475,600t, of total imports of 753,867t. During the first three quarters of this year, South Korea recorded total wood pellet imports of 1.79mn ton. Imports so far this year have already surpassed full-year 2016 imports of 1.72mn t and are projected to reach around 2.2mn-2.3mn t, according to traders’ estimates.

Japan imports much less wood pellet imports but the level is increasing. Japan imported 28,400t of wood pellets from Vietnam in the third quarter this year, or over 25pc of aggregate imports, while Canada remained Japan’s biggest supplier at 76,039t. But Japan’s third-quarter imports from Vietnam were almost 75pc higher on the preceding quarter and 3pc up on the year.

Japan logged total wood pellet imports of 313,704t in January-September. Traders estimate that Japan’s total 2017 imports will reach around 500,000t, up from 346,788t in 2016.

Vietnam has the largest wood pellet production capacity in Asia and can produce up to around 1.3mn-1.4mn t/yr. But factory operating capacity is hugely dependent on raw material availability, which is influenced by seasonal weather conditions.

@This article is published by 2017-11-16, edited by Lennart Ljungblom and is based on a release from Argus Media. BcB is since 2014 a leading news site for bioenergy related business.