2018 proved to be another booming year for the global wood pellet market with a 26% growth rate compared to 2017.
Reported global pellet trade reached a significant 23.8 million tonnes in 2018 (compared with 18.9 million tonnes in 2017).
As covered in previous MGC newsletter editions, the current pellet market growth continues to be driven by UK (industrial pellets) and Denmark (both domestic and industrial pellets) in Europe and South Korea and Japan in Asia. Renewable energy policies and regulations underpin demand. The other two European countries with recent market growth are Italy and Belgium, underscoring the European Biomass Association expectation that the European market will reach 50 million tonnes by 2020.
Fig.1 a,b: Japan and South Korea pellet imports- volume and unit price
Europe is far from being able to satisfy its internal demand from domestic pellet production with Canada and the US the main export beneficiaries. In the US, Enviva announced a $75.7 million investment to increase its pellet capacity in the state of Virginia to 750 000 tonnes. Russia continues to show ambition for a stronger and more stable presence in the European pellet market. Segezha Group recently launched a new 70 000-tonne capacity plant in the Lesosibirsk, Krasnoyarsk, region, aimed at export markets. Russian pellet capacity is expected to reach 5 million tonnes by 2020 and potentially 8 million tonnes by 2025. Brasil, with its significant availability of raw material and a developed wood processing sector, is not to be underestimated and can be expected to increase its presence in the global pellet market.
AU/NZ, as well as other Southeast Asia players, are taking small steps towards the development of a larger-scale pellets sector. Investors appear unconvinced about the regional market potential despite the relatively low capital investment requirements.
Fig.2 a,b: Japan and South Korea pellet imports by country of origin
Japan probably reached 1 million tonnes of pellets imports in 2018, with the latest data (YTD Jan-Nov 2018) showing 947 000 tonnes. Vietnam continues to grow its market share in Japan, taking 14% from Canada compared with same period of 2016. Australia has entered this market with a bit over 24 000 tonnes (2.6% market share). Pellet unit prices in Japan continued their recovery from the low of 2017 — although they remained relatively flat compared with 2016 at $183/tonne (Fig. 4 & 5).
The South Korean market is still dominated by the Vietnamese exports. However, Vietnam did experience a 9% reduction in market share due to increased exports from Malaysia, Thailand and Indonesia. South Korean YTD Jan-Nov 2018 imports reached 3.14 million tonnes with a unit price of $152/tonne, a significant increase compared with $101/tonne in 2016 and $114/tonne in 2017. (Fig. 1 & 2).