Analysis of Sawdust Particles Market in Asian Countries

China

Unlike Japan and South Korea, other Asian countries are mainly exporting countries of wood chips, such as China, Thailand, Vietnam, Indonesia and Malaysia. China's renewable energy industry in recent years showed rapid growth. In 2013, the National Energy Board of China issued the Guiding Opinion on Establishing Renewable Energy Portfolio Standards, which calls for renewable energy to account for 15% and 20% of the total energy consumption in 2020 and 2030 respectively. RPS is a requirement that increases the use of renewable energy sources such as wind, solar, biomass and geothermal energy. Provides that the electricity supply enterprises use a certain percentage of renewable energy, but some policies are still not perfect, such as the lack of regulatory and penalties and other issues.

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  Figure 1 - China's grain import and export situation by 2015

China has a wide range of biomass energy, including crop stalks, branches, animal feces, energy crops, industrial organic wastewater, municipal wastewater and waste. Wood (forest) abandoned supply of about 900Mt, of which 300Mt can be used as energy consumption. Energy crops such as sorghum and jatropha mainly cover an area of about 2 billion hectares to meet the annual production capacity of about 50Mt of bio-liquid fuel raw materials (China National Energy Bureau 2012 data). China's domestic demand for wood chips is growing, mainly in the eastern and Guangdong provinces, the local government banned coal-fired boilers, and the cost of particles lower than the rest of the country.

In addition to the growing domestic biomass production over the past few years, China is also an exporter. In 2014, China exported 287kt of wood chips to South Korea.

In 1950, exports fell sharply as Chinese producers had to compete against Vietnamese producers' chips at low prices; however, it gained a growing share of Japan's biomass market (Argus Media, 2016). China's wood chips traders have limited negotiating space (Argus Media, 2016) due to tight supply of timber resources and rising production costs leading to higher prices for Chinese wood chips (€ 105 / t) and lower competitiveness.

Japan

Regulatory framework, market drivers and barriers

In Japan, some policies and incentives have been developed to promote the production of renewable energy and the use of biomass power generation. The 2009 Basic Law on the Promotion of Biomass Utilization aims to comprehensively plan the promotion of biomass energy use policies or the 2010 National Plan for the Promotion of Biomass Utilization, with the aim of developing a basic approach to the development of biomass technologies.

After the 2011 earthquake and Fukushima nuclear power plant accident, the most important policy is from July 2012 to implement the renewable energy of the Internet price plan (FIT). According to this plan, power companies are obliged to purchase renewable energy power generation shares, such as fixed-term fixed price contracts under solar PV and biomass (METI, 2012). Since then, Japan's grain consumption has grown rapidly. Japan's Fukushima disaster in 2011, its power portfolio has become diversified. The Japanese Ministry of Economy, Trade and Industry (METI) re-examines the purchase price of FIT every year, according to which the generator's electricity is 0.15-0.28 Euro / kWh, depending on the source of wood they use.

Regular changes and modifications to the FIT program, it is very complex and challenging to understand and comply with the program requirements for generators.

Production capacity, production and raw materials

(FAOSTAT, 2016) data show that over the past five years, the domestic production of wood chips about 90kt. However, an increase in the import of sawdust particles indicates a greater consumption of Japanese wood chips. In 2015, imports from Canada, China and Vietnam reached 230kt (Argus Media, 2016).

Japan's pulp and papermaking Oji Green Resources and Mitsubishi Paper Mills have formed a joint venture to build a 75MW biomass power plant in Aomori, Japan, and is expected to start production at 2019.

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     Figure 2 - Japan wood chips import and export situation

Consumption

Taking into account the domestic production and import and export, diesel chips in 2015 consumption of about 320kt (FAOSTAT, 2016; Argus Media, 2016).

Price trend

Japan often imports high quality pellets with poor quality wood chips (FAOSTAT, 2016). The import price of sawdust particles fell from € 207 / tonne in 2012 to € 178 / t in 2015. In contrast, the 2012 ~ 2014 export price of about 110 euros / ton, 2015 export prices increased to 129 euros / ton.

Particle quality standards

In general, there are a variety of wood used in power generation in Japan. The higher the quality of the particles, the higher the purchase price. Unused wood represents the highest quality and price (0.23-0.29 € / kWh). Other wood such as sawmill waste, imported wood and wood waste are also used in biomass power plants.

The Basic Law on the Promotion of Biomass Utilization has many requirements for the use of wood pellets and general biomass, including:

■ Comprehensive, unified and efficient use of biomass

■ Reduce global warming

■ the development of recycling-oriented society

■ Promote industrial development and international competitiveness

■ revitalize the countryside

■ Make full use of different types of biomass

Energy diversification

■ Promote community-based voluntary action

■ Improve the social awareness of biomass

■ Consistency between stable food supply and biomass use

■ Environmental awareness

Japan prohibits illegal logging of wood chips. The Government of Japan promotes the international fight against illegal logging and implements the Government Procurement Policy (MAFF Japan, 2012) on the principle of "illegal logging of timber not to use". In 2010, GOJ also worked with the Government of Indonesia to develop a wood product tracking system for wood-exporting countries. Sawdust particles sold to Japan must be certified by Forest Management (FM) (Argus Media, 2016).

Proposed pellet plant

Since the implementation of the FIT program in 2011, more than 100 wood biomass power plants have been considered and 84 have been approved. The government's goal is to rapidly increase the use of renewable energy by 2030, bringing solar energy to about 15%, and the other (biomass and hydropower) account for about 10%. In addition, the government has to establish a biomass energy zone, through the cooperation of the region's stakeholders, the establishment and operation of integrated biomass energy utilization system.

Since 2005, Japan has developed about 300 biomass town plans. The Ministry of Agriculture, Forestry and Fisheries (MAFF) has developed a guide to promote the development of biomass in the East Asian countries.

Future forecast

The FIT program is expected to continue to promote Japan's biomass use. According to (Strauss, 2016), in a reasonable case, by the middle of 2020 Japan may demand more than 15Mt of wood chips per year.

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Figure 3 - Japan's biomass town

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Figure 4 - Japan industrial sawdust market forecast

Malaysia, Indonesia

Compared with Vietnam, Malaysia, Indonesia and Thailand are three countries are the production and export of small pieces of wood chips (Argus Media, 2016; Murray, 2015). Indonesia and Malaysia exported about 150kt and 60kt of wood chips to South Korea in 2014 and 2015 respectively. The two countries exported palm kernel shell (PKS) to Japan, but the supply market is still quite small (Bioenergy International, 2015). Affected by supply / quality, life and quantity trade-offs, buyer prices are still high.

Korea

Regulatory framework, market drivers and barriers

Since its inception in 2012, the Renewable Energy Portfolio Standard (RPS) plays an important role in the South Korean market for sawdust. Requiring power companies to increase their renewable energy generation ratio from 2% to 10% over the next decade.

Compared with other renewable energy sources such as wind energy, solar energy or hydroelectric power, biomass is expected to provide most of the clean energy, estimated at 50-60%. After the implementation of RPS, South Korea's demand for wood chips began to rise, the number of other countries increased imports.

RPS has advantages, including through competitive technology penetration and renewable energy supply obligations to reduce costs. However, investors may be exposed to the risk of too high or low cost of electricity supply.

Production capacity, production and raw materials

According to FAOSTAT 2016, in the past five years, South Korea's average annual production of wood chips only about 15kt, can not meet domestic demand. Forest products are mainly used for watershed protection and water purification, to prevent soil erosion and forest landscape (Korean Forest Service, 2015).

Consumption

The consumption of wood chips is much higher than that of South Korea's domestic production of wood chips. Imports of sawdust particles increased from 122kt in 2012 to 1,850kt in 2014 and slightly to 1471kt (FAOSTAT, 2016) in 2015.

Price trend

The import price is between € 109-135 / t, but € 110 / t in 2015 (FAOSTAT, 2016).

Trade and logistics

The government has set the target of importing 5Mt of wood chips by 2020 to meet 75% of the grain demand (Roos and Brackley, 2012). Wood products, including granules, are mainly from Vietnam (70%) and other countries such as Malaysia and Canada (FAOSTAT, 2016). Other suppliers from the United States, Canada, Russia, Indonesia and Australia.

Particle quality standards

Unlike most other countries, South Korea does not accept regulatory chain certification as evidence of fiber sources (Murray, 2015). The Ministry of the Environment of South Korea requires that the source of wood chips be legal and require the use of pure wood fibers without any non-wood material (Murray, 2015). The Ministry of Environment has also introduced the Act on the Promotion of Resource Stock and Recycling. Under the Act, the importer or manufacturer of the SRF shall report to the Minister of the Environment or the local government after the quality inspection, and if the product does not meet the standards, the Department may enforce the prohibition of importation and production or improvement as required. According to Murray, rice hulls are one of the major problems because particles containing any material other than wood are considered to be biomass solid waste fuels. (SRF), such as palm shells, which are allowed to be imported from waste, but will strengthen the quality of imports, production and use of these products, while establishing waste and energy for public and private organizations.

South Korea allows the import of biomass fuels - palm shells. It is expected to expand the distribution of renewable energy sources to replace fossil fuels. Moreover, this will help to solve the concerns of the power companies to implement the Renewable Energy Portfolio Standard (Ministry of Environment, Korea).

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Figure 5 - Korea's exports and imports by 2015

Future forecast

According to the US Energy Information Administration reported in 2016, South Korea's demand for wood chips is increasing, the introduction of renewable energy portfolio in 2012 increased the interest in the use of biomass and wood chips. The main imports come from Canada, Southeast Asia and the United States.

According to Bloomberg New Energy Finance, South Korea's demand for sawdust particles in 2014 was estimated at 2.2 million tonnes, equivalent to about 40 percent of the UK.

Vietnam

Vietnam has a large furniture manufacturer. As a result, it can use the rich wood waste, thus achieving the lowest production costs in the Asian region. Vietnam's large sawdust plant also helps to increase economies of scale (Argus Media, 2016) compared to Thailand, Indonesia and Malaysia. Vietnam is the major exporter, accounting for 70% of the Korean market share, but also for the Japanese and South Korean sawdust market (Murray, 2016) provided about 90 euros / ton of competitive wood chips prices. Vietnamese manufacturers' transportation costs to South Korea (0.9 euros / tonne) are also lower.

South Korea may be tightening the standards for sustainable development of wood chips, as well as ahead of the announcement of the bid traders, trade with South Korea has become less than ever before. Japan's biomass sustainability standards will also be similar to the implementation of the situation, hinder the Vietnamese traders to enter the Japanese market.

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Figure 6 - Import and export of particles in Vietnam in 2015