Market aspect is an important factor for a production, including
wood pellets. The understanding of market characteristics will also determine the success of marketing these products. Korea and Japan are the two largest wood pellet markets today in Asia, so a number of export-oriented producers are trying to fill the market. The wood pellet market for Europe has generally not been a priority, this is because large capacity is needed for shipping there, for example 40,000 - 60,000 tons / shipment, which this wood pellet producer in Indonesia cannot meet the quantity because its production capacity is still small. Delivery of wood pellets to Korea and Japan from Indonesia,
almost all of them still use containers, because the volume is not large.
What is the difference between the wood pellet market between Japan and Korea? Then, why do Indonesian pellet wood producers need to consider this? The use of wood pellets for power plants 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 also enter sustainability criteria (for example proven by
FSC), good forest management practices and stable macroeconomic conditions. While Korean buyers prefer the price of cheap wood pellets in "open markets" with short-term contracts.
Facing the above market conditions is certainly also different in reacting. The Korean market is perceived to be easier and always prices follow the market, but with this condition wood pellet producers are competing to improve their efficiency so that the selling price of their pellets can be cheap and accepted by the Korean market. This is evident from wood pellet producers in Vietnam, namely the low-price strategy proved to be the main supplier of wood pellets in Korea. But along with the limitations of raw materials and rising oil prices, the price will be corrected by these conditions. As for the Japanese market, it requires a deep study and very carefully calculation, so that only large producers can do it. Fixed prices, long contracts and large volumes are also at risk of causing losses to producers, if inflation occurs in producer countries because the feed in tariff policy (FIT) is set for a period of 20 years. This also needs to be anticipated by wood pellet producers if they want to enter the Japan market.
Biomass fuels get a 4.3% share in Japan in their 2030 energy projections. This means biomass accounts for 4.3% of 245 million MW per year with renewable energy or around 6,000 MW of biomass. To achieve this capacity, approximately 22.2 million tons of wood pellets are needed per year. At present most of the wood pellets imported by Japan come from Canada. Of the 374,000 tons of wood pellets imported by Japan in 2016, around 75% came from Canada. Whereas in 2017, wood pellets imported from Canada dropped to around 65%, then Vietnam filled quite a lot in that year, followed by China. Canada tries to continue to maintain its market share in Japan because they feel able to fulfill its requirements. The 20-year long contract in the FIT mechanism is also considered more attractive than the Canadian medium-sized supply contracts to Europe, such as with Drax in the UK for 11 years, for example in 2020 they began the contract so in 2040 the new contract ended or Japan become the wood pellet offtaker for that 20 years. In addition, the long-standing factors of the wood and its processed products business from Canada were also used to strengthen the market share of wood pellets in Japan. On the other hand, Indonesian export of wood pellets to Japan is still very small.
Most of Indonesia's wood pellets are exported to Korea, which is estimated according to the Global Trade Atlas Data of 63,000 tons in 2014 and fell slightly to 61,500 tons in 2015. Since implementing RPS (Renewable Portfolio Standard) in 2012 Korea is committed to increasing use of renewable energy, especially biomass and more specifically wood pellets in the energy sector. Based on the RPS, Korea requires a coal power plant to use a minimum of 2% renewable energy in 2012, with an increase of 0.5% / year to 2020. By 2020 they will need a minimum of 10% renewable energy with a composition of 60% renewable energy coming from wood biomass , while the remaining 40% from other sources and estimated wood pellets will be more than 10 million tons. Why are most of Indonesia's wood pellets exported to Korea? There are several factors that influence this, namely the requirements for export wood pellets to Korea are not as strict as Japan, most Indonesian wood pellet producers have small capacity with limited raw materials, making them 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 that the issue of dynamic prices in the "open market" or international market, besides the supply-demand factor, world energy prices in general are very influential, especially petroleum oil.
Indonesia, although currently still does not have large market share or still not calculated in the sector but its potential is very large. Factor of
tropical climate, large and fertile land is an extraordinary basic capital to become a biomass producer. Besides that, with a location closer to the market or user country than Canada, namely Japan and Korea, it is also an advantage. If the Indonesian deposit interest rate is eliminated or minimally reduced, then the level of passion for business is also an extraordinary driving force. Do not let the high deposit interest rate backfire, which is a disaster, one of which is late in innovating in the era of bioeconomy, even though resources are abundant. Some Indonesian wood pellet producers such as
South Pacific in Jepara, Central Java and
Singpellet in West Sumatra also have the concept of an energy plantation for the production of wood pellets with Short Rotation Coppice / SRC. The production of wood pellets from the energy plantation is the best scenario for the market penetration of Japanese and Korean wood pellets. To design a large capacity wood pellet production from the energy plantation, you can read
here. Muslim bioeconomy models with the integration of wood pellet production from energy plantations, sheep farms which are the
best assets of Muslims and honey bee farms, will excel and become the main players in the
bioeconomy era. InshaAllah. China is predicted to also become a big market for wood pellets, reviews of which we will write later. Insha Allah
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