Wood Pellet Market Update November 2018

14th November 2018

While most of Europe is experiencing a long and warm autumn, some parts are dealing with strong storms and flooding. Winter is just around the corner, and that’s what is, year after year, driving the demand for wood pellets – both for domestic and industrial grades.

North America continues its world dominance as the largest producer/exporter of pellets while Europe continues to be the largest consumer of wood pellets. While weather and energy prices (oil and natural gas) are the main indicators for the heating pellets markets, the industrial pellet markets continue to be driven by government policies.

Japan’s FiT and the Basic Energy Plan, as well as South Korea’s Renewable Portfolio Standard (RPS), continue to drive Asia’s pellet demand which is predicted to average 15-20% growth over the next decade. Despite China’s policies encouraging the limitation of coal commercial use, there are no significant signs yet that wood pellets demand will experience rapid growth. The limited supply of wood waste in China is also limiting development of its production capacity.

A shift in the European governments towards non-carbon energy producing solutions, may maintain European industrial pellet demand at current levels and potentially produce a small decrease of 1-3 % in the next decade. However, the heating pellets use in EU is expected to increase over the next ten years.

Not unexpectedly, South Korea and Japan pellet markets continue to grow, with Japan imports up 130% (YTD Jan-Sept) compared with same period of 2017; South Korea imports grew by 37% over the same period. Wood pellet unit prices in both countries are on an upward trend with South Korea up 33% to reach $150.3/tonne (from a lower base compared with Japan) while Japan prices are up 7% to $184.3/tonne (Fig. 1).

Figure 1: Wood Pellet Imports, YTD Jan-Sept, ‘000 tonnes

In Japan, Canadian pellet exports share continues to fall (from 72% in 2017 to 65% in 2018) with Vietnam gaining over 6% market share since last year. Australia is recorded as a new entrant in this market.

South Korean imports continue to arrive mainly from Vietnam with Malaysia in second place with more than 16% market share (Fig. 2).

Figure 2: Wood Pellet Major Exporters to Japan and South Korea