Asian Wood Pellet Producer & Market Snapshot

Pellet Mill Magazine reviews Asian wood pellet production, export and import markets of Thailand, Indonesia, China, Malaysia and South Korea.
By Ron Kotrba | November 16, 2016

Thailand has several policies in place that help promote the production and use of renewable energy, according to the International Energy Agency. In 2009, the government implemented the Renewable Energy Development Plan (2008-’22) and in June 2015 the country passed the Thailand Alternative Energy Development Plan (2015-’36).

Agriculture is big in Thailand. According to Chinese pellet mill maker Zhengzhou Fanway Machinery Manufacturing Co. Ltd., which supplies biomass and wood pellet mills to Thailand, in one year Thailand can produce 6 million tons of rice husk and more than 25 million tons of sugarcane bagasse. Oil palm and wood wastes are two more sources of abundant biomass in the country. The materials are primarily collected from rice, sugar and oil palm mills, and the wood processing industries, respectively. Sugarcane and rice are more concentrated in the northern and northeastern regions of the country, while the southern region has higher concentrations of oil palm processing.

As the pelleting of nonwood biomass in Thailand gains popularity, the country’s wood pellet manufacturing industry is rather established. “The growing global demand of wood pellets, especially in the Asian Market, stimulates the wood pellet manufacturing industry in Thailand,” ZFMM states. “There are many good, quality wood pellet producers in Thailand and most of their wood pellets are exported to East Asia, such as South Korea and Japan. Thus, Thailand has mastered the biomass pellet producing technology.”

In 2014, Thailand exported nearly 111,000 metric tons of wood pellets, according to the Food and Agriculture Organization of the United Nations Statistics Division (FAOSTAT). In 2015, however, Thai exports of wood pellets dropped considerably, to 25,429 tons. Contributing to Thai wood pellet exports to Japan and South Korea is BioPellets Thailand Co. Ltd.

Company CEO Kitti Chulasamaya says, in 2015, BioPellets directly exported 600 tons to South Korea and 100 tons to Japan. This year, the company has exported 400 tons to China, but it has changed how it does business compared to previous years. “We are positioning ourselves to be a producer and not do our own marketing,” Chulasamaya says, “so we are selling to a trader.” Rather than selling direct into the Korean and Japanese markets, BioPellets now primarily sells its wood pellets to traders who then determine where the product goes.

BioPellets operates three pellet mills in Thailand with a total production capacity of 18,000 tons, Chulasamaya says, adding that the company plans to double capacity to 36,000 tons. The company uses rubber wood, eucalyptus, local pine wood, leaucana, arcacia and some hardwood mix as feedstock, Chulasamaya says.

According to FAOSTAT, Thailand’s cumulative wood pellet production has grown from 20,000 tons in 2013 to 115,000 tons in 2015.

Chulasamaya says domestic consumption of wood pellets in Thailand, mostly in industrial boilers, is climbing each year, “especially for manufacturers of public companies,” he says. “But small industry has still not grown up much, as they are concerned about the cost much more than the environment.” He says common boiler fuel continues to be oil and gas on the fossil-fuel side, and palm kernel shells, wood chips, sawdust and other wood residues on the renewable side. He says some power plants may eventually move to using wood pellets, but today, if they are using renewables, it is often rice hulls and wood chips.

FAOSTAT estimates that in 2013, Thailand imported about 1,000 tons of wood pellets. This figure ticked up to 1,331 tons for 2014 and 2015.

On Thai policy to promote wood pellet production and consumption, the National News Bureau of Thailand reported on Feb. 1, 2015, that the government was considering a plan to promote the use of wood pellets in Thai industry to lessen reliance on imported fuel. The plan included government investment of 30 to 50 percent of the cost to replace factory boilers with ones capable of utilizing wood pellets. “This move will help to increase domestic consumption of wood pellets,” ZFMM says. “Therefore, it is good news for Thailand wood pellet manufacturers, especially ones who want to start biomass pellets businesses. Along with the large amount of available biomass resources, mature biomass pellet production technology and affordable pellet making machines, it will promote the development of Thailand’s wood pellet market.”

Chulasamaya says Thailand’s industry ministry has the funds and budget for factories seeking to change their oil or gas boiler to one that combusts wood pellets, “but that government support is not announced well-enough, and then people don’t know,” he says. “Moreover, that support is not just for wood pellets, but for all renewable energy, of which most funds go to support ethanol, solar and biogas.”

He says wood pellet production in Thailand started only four to five years ago, “but the first-generation of wood pellet investors, most of them shut down their own factories due to technology problems, which has left less than six [first-generation] producers,” Chulasamaya says. “Some of them turned to trading, and some of them that still operate are not full capacity because they are fixing their own machines and running the [mill] for just a routine and sell small amounts, but if you ask them to invest in new technology, they would not for sure. Now [Thailand] is on the second- or third-generation of pellet producers and the first-generation producers are still involved as advisors,” he says.

Indonesia
FAOSTAT data show that Indonesian wood pellet manufacturing doubled from 2013 to 2014, jumping from 40,000 tons to 80,000 tons in a year. Data estimates suggest a leveling off in Indonesian wood pellet production in 2015, remaining at 80,000 tons. In total, Indonesia exported slightly more than 37,000 tons in 2013, more than doubling to nearly 76,000 tons in 2014, with FAOSTAT estimates at roughly the same tonnage for 2015. A majority of Indonesian wood pellet exports are going to South Korea. According to a presentation given Jan. 28 by Gordon Murray, executive director of the Wood Pellet Association of Canada, at the Western Forest Industry Conference, Indonesia exported 63,000 tons of wood pellets to South Korea in 2014 and an estimated 61,000 in 2015, based on Global Trade Atlas data.

Interestingly, Indonesia imports of wood pellets also nearly doubled from 2013 to 2014, but volumes are extremely low. The country imported 18 tons in 2013 and 35 tons in 2014, according to FAOSTAT.

One Indonesian wood pellet producer is PT South Pacific. Steven Eyskens, the director of PT South Pacific Indonesia who is of Belgian nationality, says he’s worked in Indonesia for more than 15 years, starting in wood production and then opening a furniture factory producing furniture for export. “As I am located in a main furniture area, I was running into several companies that had waste problems with their sawdust and wood waste,” he says. “After communicating with several Korean companies, and a European pellet mill manufacturer, we decided to start a pellet mill in 2013 when the Korean market was booming.”

PT South Pacific currently has one operating pellet mill in Indonesia, with an additional four locations secured to build more factories, Eyskens says. “We are running now a 10-ton-per-hour mill setup, which we will use as well as a training center in the future to train the staff to work in the new mills we are planning to build,” he says. “As we grow, we are hoping that from our four main target centers, we can produce up to 300,000 tons per year.”

Feedstock used by PT South Pacific for its wood pellets include wood waste from furniture manufacturing, including coreboard, species of which are albasia, mango, mahogany and pine. “For the past few weeks we have been trying to work with the forestry department to put in plantations for glericidia sepium, a fast growing wood species,” he says. “I know some colleagues who are pelletizing rubber wood and different hardwoods from flooring and building industries.”

Most of PT South Pacific’s pellet production is exported to South Korea, China and Japan, Eyskens says, “and we have buyers from Europe as well.” One big initiative at the company is local implementation of wood pellet cooking stoves, called Mimi Moto, which has received a four-tier rating from the Global Alliance for Clean Cookstoves—the highest ever received, Eyskens says. The company is seeking distribution and nongovernmental organization partners in the cookstove market.

SingPellet Pte. Ltd. is a pellet producer incorporated in Singapore and operating in West Sumatra, Indonesia. Company director Wikkie Netten says SingPellet’s mill is scaled to produce up to 2,000 tons a month. “We are a pellet producer that provides woody biomass to industrial-scale customers to serve the Asian market,” Netten says. “As we set our sights on becoming the leading producer in Asia, we invest heavily in sustaining our feedstock security. We target to provide long-term supply to our clients from our vast 21,000-hectare (51,892 acres) plantation.” She says SingPellet is test-bedding various species of short-rotation coppice for its replanting program, an endeavor anticipated to provide future feedstock supply, though the company currently relies on native species. She adds that all of the wood pellets SingPellet manufactures are currently being exported to Japan. “Long-term supply contracts and the scaling up of our production are in negotiations at the moment,” Netten adds.

Eyskens says 15 Indonesian wood pellet producers are registered to export to China.

China, Malaysia, South Korea
China’s wood pellet production nearly doubled from 2013 to 2014, from 200,000 to 370,000 tons, according to FAOSTAT data. While 2015 production estimates show a leveling off, the country’s exportation of wood pellets skyrocketed from 2013 to 2014, jumping from a mere 3,293 tons in 2013 to 165,654 tons in 2014. Nearly all of the increase in production from 200,000 to 370,000 tons from 2013 to 2014 went to exports. However, though Chinese exports hit record highs in 2014, they nosedived a year later. In 2015, Chinese exports sank to 52,025 tons. According to an Argus Biomass Markets report, this marked reduction in Chinese exports was in large part due to cheaper Vietnamese competition carving out market share in the demanding South Korean pellet market. Murray and his use of GTA data suggest that nearly all of China’s 2015 exports—51,000 of 52,025 tons—were shipped to Japan. China imported just 85 tons of wood pellets in 2013, FAOSTAT data estimate. One year later, however, this figure ballooned exponentially to 7,353 tons.

In Malaysia, wood pellet production more than doubled from 2013 to 2014, arrowing up from an estimated 85,000 to 180,000 tons in just one year. As in China, official data show Malaysia’s exports took the lion’s share of its new production. In 2013, Malaysia exported 81,142 tons, rocketing to 168,588 tons in 2014. Essentially all of Malaysia’s 2014 exports, which constitute nearly 94 percent of its total domestic production, went to South Korea, according to Murray and his use of GTA data. Imports into Malaysia fell significantly from 2013 to 2014 as well, but both years’ figures were relatively low at 534 tons and 396 tons, respectively.

Pellet Association Malaysia Chairman Sree Renganathan was reluctant to share any national data on his country’s wood pellet industry with Pellet Mill Magazine, even though FAOSTAT makes estimates and official data available. “We are a two-year-old industry in Malaysia, and we are getting strong challenges from Vietnam, Thailand and Indonesia due to lower pricing offered by them,” Renganathan says. “However, we [have an advantage] since we have plenty of oil palm biomass material. At the moment, the total quantity of production and members I am not keen to reveal—unless I see it can benefit my members.”

In the granddaddy of all Asian wood pellet consumption markets, South Korea imports rallied from 122,447 tons in 2012 to 484,668 tons in 2013 to an impressive 1.85 million tons in 2014, according to official FAOSTAT data. Imports backed off in 2015, down to 1.47 million tons. Domestic production estimates are stagnant from 2012-‘15 at 15,000 tons annually. Exports dropped from 20 tons in 2012 to estimates of 1 ton per year subsequently. According to Murray and his GTA data, 743,000 tons and 1.03 million tons of wood pellets entered South Korea from Vietnam alone in 2014 and 2015, respectively.

Author: Ron Kotrba
Senior Editor, Biomass Magazine
218-745-8347
rkotrba@bbiinternational.com