Wood pellet shipments to Korea and Japan at a record high, Vietnam a major supplier

Over the past few years, South Korea has become the largest pellet importer in Asia, ahead of Japan, and the third largest in the world, and South Korean demand is expected to continue to increase in the coming years, reports the Wood Resource Quarterly. Vietnam has been the major supplier of pellets to Asia, accounting for about 65 per cent of the total import volume in late 2016 and early 2017.

Wood pellet imports to Asia reached an all-time-high in the 4Q/16 when Japan and South Korea together imported 630,000 tons of pellets. Although import volumes were down slightly in the 1Q/17, they were still over 40 per cent higher than in the 1Q/16.

South Korea is by far the main destination for pellets in Asia, and in 2016, the country was the world’s third largest importer of pellets, trailing only behind the United Kingdom and Denmark. Although import volumes to Japan have tripled from 2014 to 2016, the usage of pellets is still at a relatively low level.

Consumption of pellets in Japan and South Korea has increased quite rapidly the past four years because of new government requirements which favour reducing carbon emissions and increasing the usage of renewable energy. The recent trend in pellet usage is likely to continue in the future and is driven both by incentives and regulations. With an urgent need to replace nuclear energy and generous feed-in-tariffs, it is expected that Japan will increase buying substantially over the next five years.

Vietnam has been the major supplier of pellets to Asia for the past three years, accounting for almost two-thirds of the shipments to Japan and South Korea in 2016. Canada was an early supplier to the Asian market, but its market share dropped from 22 per cent in 2014 to 14 per cent in 2016. However, in the 1Q/17, Canada increased shipments to Asia to the second the highest quarterly level on record and the market share was up to 21 per cent.

Import prices for pellets to South Korea fell dramatically from early 2014 to the summer of 2016, according to a recent WRQ Trade Snapshot report. The two-year long price decline ended in the 3Q/16, when prices slowly started to recover. The import prices continued their upward trend during the first four months of 2017 with Malaysian pellets increasing the most.