Wood Pellets Market Update: August 2018

21st August 2018

Global pellet demand continues to grow based on EU, South Korea and Japanese demand.

In the first quarter of 2018, US production capacity of domestic use pellets went up 12.1% while industrial pellet production increased by 4.9%, compared with the same period in 2017.

Canada and Vietnam remain major wood pellet producers. However, Vietnam may become challenged by higher raw material costs. Vietnam continues to bring new production capacities online with a new 120 000 tonnes/year capacity plant to start producing soon.

South Korea vs Japan pellet imports

Vietnamese pellet sector grew from virtually zero to over 2 million tonnes in just six years. It was supported by the rapid growth of the furniture sector that supplied dry, small sized residues and sawdust that required no drying or size reduction milling. Excess empty containers also provided a cheaper transportation solution to South Korea, and therefore assisted in producing a competitive pellet product.

Future growth potential is likely to be dictated by various factors such as furniture and woodchip sectors development, increasing requirement for strong sustainability credentials of the feedstock and a probable consolidation of the production capacity with state-of-the-art capacities replacing small sized production facilities.For the first six-months of 2018 South Korean pellet imports increased by 51% while Japan imports grew with a whopping 137% compared with the same period of last year.

Pellet Main Exporters, % of Total Volume

Pellet prices are continuing their recovery, with the Korean import unit price standing at 33% higher and Japan at 5% higher, compared with 2017 (Figure 5).Vietnam continues to dominate Korea’s pellet market with new entrants Malaysia and Indonesia replacing Canada and Russia exports compare with the 2015 year. In Japan, Canada and Vietnam remain the dominant players, with China – a 2015 market player, reduced to 1.1% market share.

Regional players, a more specific example being Malaysia, are getting into the market assisted by low-cost plantation logs and harvesting residues that are not processable for higher value products.

Australia and NZ continue to consider their role in the regional market, while other countries are quickly getting onto the fast-moving pellet train. The question remains however, as to why there are no significant AU/NZ pellet producers? Is the cost of feedstock or production costs a constraint?