EXPORT WOOD PELLET: TO JAPAN OR KOREA?
Market aspect is an
important factor for production, including wood pellets. The introduction of
the characteristics of a good market will also determine the success of
marketing the product. Korea and Japan are the two biggest wood pellet markets
at this time, so a number of export-oriented producers are trying to fill the
market. The wood pellet market for Europe is generally not a priority, this is
because a large capacity is required for delivery there, for example 40,000 -
60,000 tonnes / shipment, which wood pellet producers in Indonesia cannot yet
fulfill because their production capacity is still small. Almost all of the
wood pellets shipped to Korea and Japan from Indonesia also still used
containers, because the volume was not large.
What are the
differences in the wood pellet market between Japan and Korea? Then, why do
Indonesian wood pellet producers need to consider this? The use of wood pellets
for power plants in both Japan and Korea is policy driven, namely Renewable
Portfolio Standard (RPS) in Korea and Feed in Tariff (FIT) in Japan. But also
how the mechanism of supplying wood pellets in the two countries is different.
Japanese buyers prefer long-term contracts with fixed prices, wood pellet
producers are also included in the sustainability criteria (for example, proven
by FSC), good forest management practices and stable macroeconomic conditions.
Meanwhile, Korean buyers prefer cheap wood pellet prices in "open
markets" with short-term contracts.
Facing the above
market conditions is of course also different. The Korean market is considered
easier and prices always follow the market, but with this condition wood pellet
producers are competing to increase their efficiency so that the selling price
of pellets can be cheap and accepted by the Korean market. This is evident from
wood pellet manufacturers in Vietnam, namely with a low price strategy, it has
proven to be the main supplier of wood pellets in Korea.
However, along with
limited raw materials and rising oil prices, the price will be corrected
according to these conditions. Meanwhile, the Japanese market demands in-depth
study and very thorough preparation, so that only large manufacturers can do
it. Fixed prices, long contracts and large volumes also risk causing losses to
producers, if inflation occurs in the producing countries because the feed in
tariff (FIT) policy is set for a period of 20 years. This also needs to be
anticipated by wood pellet producers if they want to enter the market. Japan.
Biomass fuels account
for a 4.3% share of Japan in their 2030 energy projection. This means that
biomass accounts for 4.3%
Biomass
fuels account for a 4.3% share of Japan in their 2030 energy projection. This
means that biomass accounts for 4.3% of 245 million MW per year with renewable
energy or around 6,000 MW from biomass. To reach this capacity, it takes
approximately 22.2 million tons of wood pellets per year. Currently most of the
wood pellets imported from Japan come from Canada.
Of
the 374,000 tonnes of wood pellets imported by Japan in 2016, around 75% came
from Canada. Meanwhile in 2017, wood pellets imported from Canada fell to
around 65%, then Vietnam filled quite a lot in that year, followed by China.
Canada tries to keep maintaining its market share in Japan because it feels
capable of meeting the requirements. The 20-year long contract under the FIT
mechanism is also considered more attractive than the Canadian medium supply
contract to Europe, such as with Drax in the UK for 11 years, for example in
2020 they started a contract, then in 2040 the new contract ended or Japan
became a wood pellet product offtaker for 20 years. In addition, the wood
business and processing factors from Canada, which have been running for a long
time, are also used to strengthen the market share of wood pellets in Japan. On
the other hand, Indonesia's wood pellet exports to Japan are still very small.
Most
of Indonesia's wood pellets are exported to Korea, which is estimated according
to Global Trade Atlas Data at 63,000 tonnes in 2014 and fluctuates slightly to
61,500 tonnes in 2015. Since implementing RPS (Renewable Portfolio Standard) in
2012, Korea is committed to increasing the use of renewable energy in
particular. biomass and more specifically wood pellets in the energy sector.
Based on the RPS, Korea requires coal-fired power plants to use a minimum of 2%
renewable energy in 2012, with an increase of 0.5% / year until 2020. By 2020
they will need a minimum of 10% renewable energy with a composition expected
that 60% of renewable energy comes from wood biomass. , while the remaining 40%
comes from other sources and it is estimated that wood pellets will be more
than 10 million tonnes.
WHY ARE MOST OF THE WOOD PELLETS
PRODUCED BY INDONESIA EXPORTED TO KOREA?
There
are several factors that influence this, namely the requirements for exporting
wood pellets to Korea are not as strict as Japan, most Indonesian wood pellet
producers have small capacities with limited raw materials so that they are
more suitable for short-term contracts and prices offered by Indonesian wood
pellet producers. can compete with other producers such as Vietnam, Thailand and
Malaysia. Wood pellet is basically a new product for the energy sector, so the
problem of dynamic prices in the "open market" or the international
market, apart from supply-demand factors, also energy prices in general are very
influential, especially oil.
Indonesia,
although currently still does not have a large market share or it has not been
calculated in this sector, the potential is very large. Tropical climatic
factors, vast and fertile land are extraordinary basic assets to become a
biomass producer. In addition, with a location closer to the market or user
country than Canada, it is also an advantage. If the rate of interest on
Indonesian deposits is eliminated or at least reduced, the level of passion for
doing business will also be a tremendous driving force. Do not let the
application of high deposit rates backfire, which is a disaster, one of which
is being late in innovating in the bioeconomy era, even though the resources
are abundant.
Several
Indonesian wood pellet producers such as the South Pacific in Jepara and
Singpellet in West Sumatra also have the concept of energy gardens for the
production of wood pellets with fast rotation crops (Short Rotation Coppice /
SRC). Wood pellet production from energy plantations is the best scenario to enter
/ penetrate the Japanese and Korean wood pellet markets. To design a large
capacity wood pellet production from energy gardens, you can read it here. The
Muslim bioeconomy model with the integration of wood pellet production from
energy gardens, sheep farming which is the best treasure of Muslims and honey
bee farming, will excel and become a major player in the bioeconomy era.
In recent years Indonesian has started to see the light and we are happy to be a part of a fast moving market which we believe will have a long term and sustainable part to play in our future energy mix.
Wood pellets are generally made from waste biomass products such as sawdust, tree pruning’s or grass clippings. A pellet mill is used to compact the waste biomass into an incredibly dense fuel source. Our pledge to you is to supply top quality pellets using only ethically sourced biomass.
Capacity 25.000 Tonnes/Month (Consortium Manufacturer)
Price & Order: phone: +81283285838
email: bejayawoodpellet@gmail.com
Branch Office: JL.Taman Heleconia Raya,
Block HO.2 No.20, Tarumajaya, Harapan Indah, Bekasi West Java Indonesia
PT. Bestari Anugerah Jaya Orchard Square Gos.C.02,
Kelapa Hybrida Raya, North Jakarta,
Indonesia sales@bejaya.com
Manufacturers ;
Lamongan Surabaya Wonosobo Semarang
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