Get Wise on Palm Kernel Shell
Our team is just now putting the final touches on the final issue of Pellet Mill Magazine for the year. I’m happy to report that its tone is bullish, more so than any other issue this year. Candidly, last year’s winter left everyone in our industry in a funk, regardless of whether or not they rely on residential consumption to grow their business. Attitudes are improving, but pellet producers in the northeast are all doing snow dances and hoping the Jack Frost does his very best to wear out his welcome this year.
This issue of Pellet Mill Magazine was our second issue in the title’s history to look exclusively at Asian production and consumption. The bottom line is if wood pellets are going to ascend to the level of a truly global energy commodity, some country in Asia is going to have to embrace them as a means to their low-carbon energy goals.
While putting together this issue, our team learned that Japan might be that country. What about South Korea you ask? It might be a little bit of a case of sour grapes, but most North American producers and industry observers doubt South Korea’s commitment to wood pellets. To be fair, they have imported over a million tons in a year in the past, something Japan is a long way from doing, but they are reluctant to enter into long term offtake agreements with anyone. For the most part the folks we talk to believe South Korea is committed to cofiring with wood pellets so long as Vietnamese producers are willing to sell them to them at ultra-low prices.
Japan, however is willing to sign long term off take agreements and has done so with Canadian producers already. Pellet volumes this year will flirt with the half million ton mark and everyone is trying to divine what the trajectory and rate of growth will be in Japan.
This biomass demand, however, is being felt by everyone with a decent shipping lane leading to Japanese ports and probably the most interesting discovery for me this month was learning just how robust the Japanese appetite for palm kernel shell (PKS) is, right now. Palm kernel shell is the byproduct from the production of palm oil. Palm oil production occurs largely in Malaysia and Indonesia and both of those countries are exporting healthy quantities of PKS to Japan, all presumably to cofire in power stations. If someone knows of another usage for PKS, I’d be interested in knowing about it. In fact, PKS is currently in the cat bird seat relative to biomass shipments into Japan. Imported PKS volumes are averaging right around 50,000 tons per month right now according to the UN Comtrade database, and the per ton price is just about half what imported pellets are going for.
There is a limit to PKS supply however, but for now, no one really knows what that might be. This material is already a formidable challenger for wood pellets and I think will likely figure into Japan’s biomass strategy until all of the available supply is spoken for.