Wood pellet market potential developing slowly, for Australia
For Australian producers, the global wood pellet market is developing relatively slowly, largely due to our distance from the main markets in Europe.
Global wood pellet production reached almost 28 million tonnes in 2016, around 4% higher than total demand for the year, according to estimates from Hawkins Wright, a UK based consulting firm with expertise in the pulp and fibre supplies market.
The entire global wood pellet market, including the vast bulk of production, is in the Northern Hemisphere, with Europe accounting for more than three-quarters of total demand. Over 2016, the UK was the largest consumer, using more than double the volume (around 3.3 million tonnes) of second-placed Italy.
The market is essentially split into the small-scale domestic and the large-scale industrial markets. The latter markets are growing in Asia, in particular in South Korea (the sixth largest consumer) and Japan, where imports almost doubled in 2016, and are expected to increase again in 2017.
It is markets in Japan and South Korea that are likely to be of greatest interest to pellet producers (or those considering producing pellets) in Australia. This is more than just a geographic consideration, especially for supplies to Japan. Post the Great Tsunami and the ongoing Fukushima nuclear power plant disaster, major Japanese energy users are working to change their energy mix to more benign sources. When it comes to bio-energy and some other renewables, the Japanese government is providing assistance and support.
The traditional pulp and paper sector, purchaser of large quantities of Australian woodchips, is a key industry undertaking migration of its energy sources. Australian woodchip suppliers may shortly be wood pellet suppliers to their same customers, a relationship that is far more bankable from any perspective than entering the global spot market for industrial wood pellets.
Industrial use of wood pellets includes dedicated pellet burning as well as co-firing along with coal to generate electricity, and in direct industrial applications, for the generation of thermal heat, sometimes as a by-product of the electricity generation.
Despite the opportunities, the market remains significantly under-developed from an Australian stand-point. IndustryEdge’s analysis shows that very little wood has been exported as wood pellets over the last five years.
Australia’s wood pellet exports are small and sporadic at best. For the year-ended January 2017, shipments greater than 50 tonnes totaled just 639 tonnes and were valued at a total of AUDFob315,853. The average reported price was an impressive AUDFob494/t or USDFob369/t. there may be something wrong with this data, given average global prices.
Recently, wood pellet prices have been reported to be selling at the bottom of their range, at around USD114/t delivered. However, expectations are that prices will continue to rise, while remaining below the price of woodchips.
Lower prices do not diminish the concerns of the pulp sector, for whom as Hawkins Wright point out, any competition for supply will increase price pressures.
To keep up to date, go to www.industryedge.com.au and register for ‘Free Stuff’.
Reprinted by agreement with IndustryEdge, the publisher of the monthly, subscription only Wood Market Edge and Pulp & Paper Edge. Go to www.industryedge.com.au for further updates and complimentary resources.
Contact IndustryEdge at firstname.lastname@example.org or +61 3 5229 2470.