Post on 03-Aug-2020
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Market focus: Global trade flows Sabah International Biomass Forum 2019
Claire Pickard-Cambridge Argus Asia solid fuels editorial manager 14 October 2019
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Argus Media group notices
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• About Argus
• New price indexes to underpin physical markets
• Global market trends and key price drivers
• Japanese demand gathers steam, volatile year ahead
• Policy and certification challenges in Asian markets
• Concluding thoughts
Agenda
• One of the world’s leading PRAs, Argus is a team of nearly 1,000 staff members in 22 global offices
• Publishing more than 21,000 daily spot and forward price assessments, plus market intelligence for world commodities markets
• Coverage includes: ◦ Energy
◦ Fertilizers
◦ Petrochemicals
◦ Metals
• Services ◦ Price reporting and indexation
◦ Consulting
◦ Conferences
• Indexation examples ◦ US crude oil
◦ European gasoline
◦ Asia-Pacific LPG
◦ Coal
◦ US and European environmental markets
The Argus view
Copyright © 2019 Argus Media group. All rights reserved.
Argus Biomass Markets
Copyright © 2019 Argus Media Ltd. All rights reserved.
• Launched in 2009
• Weekly price assessments for North America, Europe and Asia, news and analysis
• First Asian assessment: end 2015 – fob Vietnam wood pellet index
• Fob Indonesia PKS assessment launched in 2017 and starting to be used in long-term indexation
• Launched a set of delivered South Korean wood pellet assessments in 2018
Latest Argus wood pellet spot prices at a glance
Copyright © 2019 Argus Media group. All rights reserved.
Source: Argus 9 October 2019
Tighter focus on South Korean market:
◦ Cfr South Korea wood pellets
◦ Delivery, duty paid (DDP) prices for S Korean wood pellets delivered to Daejong + Gunsan (already used in a contract)
◦ Fob Indonesia PKS index gaining traction in Asian contracts
Launch of new price indexes
Copyright © 2019 Argus Media group. All rights reserved.
Copyright © 2019 Argus Media group. All rights reserved.
Top wood pellet net importers 2018
UK 7.8mn t +15pc
Italy* 2.2mn t +22pc
Belgium 826,000t
-5pc
Denmark 3.1mn t +19pc
South Korea
3.5mn t +46pc
*mainly residential
Japan
1.1mn t + 109pc
EU-28 net imports rose 27pc y-o-y to 9.5mn t
Market Reporting
Consulting
Events
Asian wood pellet markets
Adjusting to policy changes
Copyright © 2019 Argus Media group. All rights reserved.
70
80
90
100
110
120
130
140
150
160
170
fob Vietnam Wood pellets cfr Gwangyang Wood pellets
ddp Gunsan Wood pellets ddp Daejeon Wood pellets
REC oversupply develops in 2019,
discouraging S Korean IPP buyers
N American + Asian supply
(Vietnam, Malaysia, Indonesia
and Thailand) rises in 2019
Argus wood pellet spot market trends ($/t)
Copyright © 2019 Argus Media group. All rights reserved.
50,000
60,000
70,000
80,000
90,000
100,000
110,000
120,000
70
80
90
100
110
120
130
140
150
REC s
pot
pri
ce (
Kore
an w
on/REC)
Fob V
ietn
am
wood p
ellets
($/t)
Fob Vietnam wood pellets ($/t) REC spot price (Korean won/REC)
WP monthly average pricing
REC spot price halves amid REC oversupply
Fob Vietnam wood pellet price vs S Korea REC price
REC price fall discourages IPP buying of wood pellets from 2018
Copyright © 2019 Argus Media group. All rights reserved.
Japan and South Korea wood pellet imports (‘000t)
2019 imports expected to be 4.4mn t
Japan’s growth faster than S Korea’s in first 8 months
Copyright © 2019 Argus Media group. All rights reserved.
S Korea wood pellet monthly imports (‘000t)
0
50
100
150
200
250
300
350
400
Jan Feb Mar Apr May Jun Jul Aug
Vietnam Malaysia Indonesia Thailand Russia Canada Other
Source: customs data
Copyright © 2019 Argus Media group. All rights reserved.
• Imports expected to be as low as 3mn t in 2019
• Seoul encouraging use of unused forest biomass
• Fall in REC price led to drop in imports by IPPs
• Return of nuclear, more renewables this year
South Korea’s wood pellet annual imports (‘000t)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2012 2013 2014 2015 2016 2017 2018 Jan-Aug2019
Vietnam Malaysia Indonesia Thailand Russia Canada Other
Expected imports as low as 3mn t
Expected biomass projects in South Korea 2020-2022
Company Plant Capacity (MW) Start-up Wood pellet (t/yr) Wood chip (t/yr)
Korea South East
Power (Koen) Yeongdong Unit 2 200 June 2020 900,000
CGN Daesan Power CGN Daesan Power 109 December 2020 500,000
GS EPS Biomass #2 105 December 2020 300,000 200,000
SMG Energy SMG Biomass Power
Plant 100 December 2020 430,000
Gwangyang Green
Energy
Gwangyang Biomass
Power Plant 220 July 2022 480,000 528,000
Korea Midland
Power Gunsan Bio 200 December 2022 800,000
Total 3,410,000 728,000
Copyright © 2019 Argus Media group. All rights reserved.
• Complex new REC system, but existing dedicated power projects using imported wood pellets retain 1.5REC/MWh. Use of wood pellets for co-firing lost REC support, thus encouraging dedicated biomass power
• Firing with unused domestic forest biomass (cannot be used in other industrial functions) earns lot of RECs and is displacing some imports
• Many policy changes and wood pellet quality is becoming stricter. But Malaysian and Indonesian suppliers should meet quality changes with ease – these are mainly aimed at stopping use of rice husks in pellets
Project challenges in South Korea
Copyright © 2019 Argus Media group. All rights reserved.
Copyright © 2018 Argus Media group. All rights reserved.
S Korea to raise NCV for imported wood pellets Current standard National Institute of Forest Science (NIFoS) final Proposal
Grade 1 Grade 2 Grade 3 Grade 4 Industrial I1 I2 I3
Diameter (mm) 6-8 6-8 6-8 6-25 Dimension (mm) 6-8 6-10 6-12
Length (mm) ≤ 32 ≤ 32 ≤ 32 ≤ 32 Length (mm) ≤ 40 ≤ 40 ≤ 40
Moisture (%) ≤ 10 ≤ 10 ≤ 15 ≤ 15 Moisture (As Received Basis %) ≤ 10 ≤ 10 ≤ 10
Ash (%) ≤ 0.7 ≤ 1.5 ≤ 3.0 ≤ 6.0 Ash (Air Dried Basis %) ≤ 1.5 ≤ 3.0 ≤ 5.0
Durability (%) ≥ 97.5 ≥ 97.5 ≥ 95.0 ≥ 95.0 Durability (As Received Basis %) ≥ 97.5 ≥ 96.5 ≥ 95.0
Fine (%) < 1 < 1 < 2 < 2 Fine (As Received Basis %) ≤ 4 ≤ 5 ≤ 6
Other additives (%) < 2 < 2 < 2 < 2 Other additives (As Received Basis %) < 3 < 3 < 3
Gross calorific Value (kcal/kg) Gross calorific Value (MJ/kg)
≥ 4,300 ≥ 18.0
≥ 4,300 ≥ 18.0
≥ 4,040 ≥ 16.9
≥ 4,040 ≥ 16.9
Net calorific Value (As Received Basis MJ/kg) ≥ 16.5 ≥ 16.5 ≥ 16.5
Density (kg/m3) ≥ 640 ≥ 600 ≥ 550 ≥ 500 Bulk density (As Received Basis kg/m3) ≥ 600 ≥ 550 ≥ 500
Nitrogen (%) ≤ 0.3 ≤ 0.5 ≤ 0.7 ≤ 1.0 Nitrogen (As Received Basis %) ≤ 0.5 ≤ 0.7 ≤ 0.7
Pellet particle size distribution (%) N/A N/A N/A N/A Pellet particle size distribution (As Received Basis %) N/A N/A N/A
Sulphur (%) ≤ 0.05 ≤ 0.05 ≤ 0.05 ≤ 0.05 Sulphur (Air Dried Basis %) ≤ 0.05 ≤ 0.05 ≤ 0.05
Chlorine (%) ≤ 0.05 ≤ 0.05 ≤ 0.05 ≤ 0.05 Chlorine (Air Dried Basis mg/kg) ≤ 0.03 ≤ 0.05 ≤ 0.1
Arsenic (Air Dried Basis mg/kg) ≤ 1 ≤ 1 ≤ 1 ≤ 1 Arsenic (Air Dried Basis mg/kg) ≤ 1 ≤ 1 ≤ 1
Cadmium (Air Dried Basis mg/kg) ≤ 0.5 ≤ 0.5 ≤ 0.5 ≤ 0.5 Cadmium (Air Dried Basis mg/kg) ≤ 0.5 ≤ 0.5 ≤ 0.5
Chromium (Air Dried Basis mg/kg) ≤ 10 ≤ 10 ≤ 10 ≤ 10 Chromium (Air Dried Basis mg/kg) ≤ 10 ≤ 10 ≤ 10
Copper (Air Dried Basis mg/kg) ≤ 10 ≤ 10 ≤ 10 ≤ 10 Copper (Air Dried Basis mg/kg) ≤ 10 ≤ 10 ≤ 10
Lead (Air Dried Basis mg/kg) ≤ 10 ≤ 10 ≤ 10 ≤ 10 Lead (Air Dried Basis mg/kg) ≤ 10 ≤ 10 ≤ 10
Mercury (Air Dried Basis mg/kg) ≤ 0.05 ≤ 0.05 ≤ 0.05 ≤ 0.05 Mercury (Air Dried Basis mg/kg) ≤ 0.1 ≤ 0.1 ≤ 0.1
Nickel (Air Dried Basis mg/kg) ≤ 10 ≤ 10 ≤ 10 ≤ 10 Nickel (Air Dried Basis mg/kg) ≤ 10 ≤ 10 ≤ 10
Zinc (Air Dried Basis mg/kg) ≤ 100 ≤ 100 ≤ 100 ≤ 100 Zinc (Air Dried Basis mg/kg) ≤ 100 ≤ 100 ≤ 100
Copyright © 2019 Argus Media group. All rights reserved.
Japan wood pellet monthly imports 2019 (‘000t)
Copyright © 2019 Argus Media group. All rights reserved.
• Imports expected to climb to 1.4mn t in 2019 with new biomass plants online
• Feed-in tariff still applies at old rate of 24 Y/kWh for those with financing/long-term contracts in place by September 2019
• Japan wants 22-24pc of its output from renewables by 2030 (16pc 2017/18)
Japan’s annual wood pellet imports (‘000t)
0
200
400
600
800
1,000
1,200
1,400
2012 2013 2014 2015 2016 2017 2018 Jan-Aug2019Vietnam Canada
Indonesia, Malaysia, Thailand Australia
Other
Expected imports up to 1.4mn t
• 448MW of biomass power capacity added in 2019 fiscal year to March under FiT system (up from 409MW added previous year)
• But forecasting new Japanese power capacity very hard – no one is sure how many planned projects will survive lower feed-in-tariff (FiT). Some think 80pc of approved projects will not be built
• Nearly half of planned biomass power projects declared void when FiT law changed in 2017. FiT was so oversubscribed that incentive was cut to 21 Y/kWh from 24 Y/kWh
New project challenges ahead in Japan
Copyright © 2019 Argus Media group. All rights reserved.
Copyright © 2019 Argus Media group. All rights reserved.
Japan’s biomass power capacity (MW)
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Japan 2030 target: 6,020-7,280MW
Source: Meti
Renova 75MW 2022
Air Water 75MW 2020
Kyushu 2022 75MW
Air Water 50MW 2023
Sumitomo 112MW 2023
63 new projects came online in 2018-19 so total of 358 working projects now
E-Rex Buzen 75MW 4Q2019
Copyright © 2019 Argus Media group. All rights reserved.
Malaysia, Indonesia, Thailand wood pellet exports
149
296
527
703
355
64 85
135
276
133
25 22
130
289
136
0
100
200
300
400
500
600
700
800
2015 2016 2017 2018 Jan-Jul 2019
Malaysia Indonesia Thailand
‘000t
Market Reporting
Consulting
Events
European wood pellet developments
Supply starts to outweigh demand
Copyright © 2019 Argus Media group. All rights reserved.
Spot wood pellet price drivers in Europe
• Demand: European wood pellet demand grew significantly on the year throughout 2018
• EU-28 net imports rose by 27pc on the year to 9.5mn t
• Supply: Production facilities delayed, supply disruptions in 2018. This year supply normalized and prices fell. But a cold winter will quickly create shortages given limited storage
• Buyers were more reliant on the spot market
Cif NWE wood pellets price trend 2015-Oct 2019
Copyright © 2019 Argus Media group. All rights reserved.
Rising power capacity, hurricanes, fires, flooding contributed to 2018 price peak earlier this year
Delays in some large demand projects
Some recent Drax outages contributed to latest price drop
Copyright © 2019 Argus Media group. All rights reserved.
European wood pellet power plant capacity growth
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
Start 2016 2016 2017 2018* 2019* 2020*
UK Belgium Netherlands Denmark
Orsted’s Studstrup 3
EPH’s Lynemouth
RWE’s Amer 9
Orsted’s Avedore 1
Drax unit 1
Uniper’s MPP3
RWE’s Eemshaven
MGT’s Teesside
*Expected
MW
Short-term outlook: Planned wood pellet-fired capacity
Copyright © 2019 Argus Media group. All rights reserved.
Utility Plant Capacity Co-firing? Status Consumption*
EPH Lynemouth 396 MW Dedicated Commissioning 1.6 mn t/yr
MGT Teesside 299 MW Dedicated Expected 1Q20 1mn – 1.2mn t/yr
RWE Amer 9 600MW 80pc by 2020 Co-firing at 50pc 1.7-1.8mn t/yr
RWE Eemshaven 2 x 777MW 15pc 3Q19 (B) and 4Q19 (A) start
800,000-830,000 t/yr
Uniper Maasvlakte 1.1GW 15pc Oct 2019 start 200,000-250,000t/yr
Engie Rotterdam 713MW 10pc July 2019 start 500,000-550,000t/yr
*Argus estimates – up to 6mn t demand addition
Copyright © 2019 Argus Media group. All rights reserved.
European wood pellet outlook 2019-2020
• Demand will continue to grow along with production capacity – 6-7 large European biomass facilities coming on line in 2019/early 2020
• Long-term contract performance is key – disruptions to supply have resulted in more spot market activity
• Supply disruptions to Europe 2018/early 2019 included sawmill closures and forest fires in Canada, which upset rail, and hurricanes in US which caused operational and shipping delays
• Demand for SBP-compliant pellets will continue to increase
US planned production 2019
Copyright © 2019 Argus Media group. All rights reserved.
Country Company Plant Capacity Planned start
up Status
US Enviva Hamlet 600,000t/yr June 2019 Operating
US Blue Sky Biomass
Adel 340,000t/yr 1Q2018? In development
US Highland Pellets Enterprise 600,000t/yr 2020 Plans pending
offtake agreements
US Highland Pellets Stevens 600,000t/yr 2020 Plans pending offtake
agreements
US Oregon
Torrefaction John Day
91,000t/yr torrefied pellets
2019? Planned
Copyright © 2019 Argus Media group. All rights reserved.
• Rising European, Nordic capacity fuelling exports, but sellers also target Asia
• US exports Jan-Aug up 20pc vs 2018 to 4.36mn t
• Canada exports Jan-Aug up 5pc to 1.64mn t
• But sawmill cutbacks in BC curb Canadian export growth – pine beetle
Strong growth in North American wood pellet exports
0
1
2
3
4
5
6
7
8
9
10
2012 2013 2014 2015 2016 2017 2018 Jan-Aug2019
North American wood pellet exports (mn mt)
North American wood pellet exports (mn mt)
mn t
Market Reporting
Consulting
Events
Palm kernel shells
Market gains traction but supply tightening
32
Argus fob Indonesia PKS price ($/t)
Copyright © 2019 Argus Media Ltd. All rights reserved.
67.00
69.00
71.00
73.00
75.00
77.00
79.00
81.00
83.00
85.00
10 May 2017 10 Aug 2017 10 Nov 2017 10 Feb 2018 10 May 2018 10 Aug 2018 10 Nov 2018 10 Feb 2019 10 May 2019 10 Aug 2019
Prices near $80/t now on PKS supply shortage, which grew from mid- year
Export tax package drops by $10/t in late Nov 2018 as CPO payment system changes
Copyright © 2019 Argus Media Ltd. All rights reserved.
◦
◦
Japanese imports of PKS gather steam
Copyright © 2019 Argus Media group. All rights reserved.
0
200
400
600
800
1,000
1,200
1,400
2012 2013 2014 2015 2016 2017 2018 2019 Jan-Aug
Indonesia Malaysia Thailand
‘000 t
Imports expected to top 2mn t in 2019
◦
◦
Japanese imports of PKS pro-rated for 2019
Copyright © 2019 Argus Media group. All rights reserved.
0
200
400
600
800
1,000
1,200
1,400
2012 2013 2014 2015 2016 2017 2018 2019 Prorate fullyear
Indonesia Malaysia Thailand
‘000 t
• Japan’s METI committee been meeting this year to discuss how to certify PKS for sustainability and legality
• Proving hard to find best system of certification. But they have drawn up standards on environmental issues, how forests are managed, social issues and governance issues as basics that should be met
• Social standards - includes no child labour, no forced labour and right of
labour unions to organize
• Governance – must observe local law and international law on treaties, with power plants providing transparency on origins of their PKS supply
PKS sustainability certification challenge looms
Copyright © 2017 Argus Media Ltd. All rights reserved.
Copyright © 2019 Argus Media group. All rights reserved.
Indonesian PKS annual exports (‘000t)
999 1,104 774
325 380
411
312
353
194
0
500
1,000
1,500
2,000
2,500
2017 2018 Jan-Jul 2019
Japan Thailand South Korea Singapore
Copyright © 2019 Argus Media group. All rights reserved.
Malaysia’s PKS exports on growth trend (‘000t)
240
305 256
21
51
12
0
50
100
150
200
250
300
350
400
2017 2018 Jan-Jun 2019
Japan Thailand Taiwan Singapore Other
Copyright © 2018 Argus Media group. All rights reserved.
Fob Indonesia PKS monthly averages ($/t)
450
500
550
600
650
700
750
800
70
72
74
76
78
80
82
Indonesi
a m
onth
ly C
PO
benchm
ark
Fob Indonesi
a P
KS m
onth
ly a
vera
ge
Fob Indonesia PKS price vs. Indonesia CPO benchmark
fob Indonesia PKS monthly average Indonesia monthly CPO benchmark
CPO price can be at big premium to PKS
PKS and palm oil driven by different market fundamentals
Copyright © 2019 Argus Media group. All rights reserved.
Indonesia total PKS export tax package ($/t)
0
5
10
15
20
25
30
35
40
350
400
450
500
550
600
650
700
750
800
Indonesi
a t
ota
l PKS e
xport
tax
Indonesi
a m
onth
ly C
PO
benchm
ark
Indonesia monthly CPO benchmark Indonesia total PKS export tax
$12/t
$17/t tax
$7/t
Indonesia monthly CPO benchmark
falls by over $100/t since 2017
Copyright © 2019 Argus Media group. All rights reserved.
• Sales from Asia to Europe: If prices are firm, bigger vessels may be viable but utilities often seek SBP certification
• In Japan, full impact of reduced FiT still unclear as projects are re-assessed and PKS certification is under discussion
• In South Korea there is reduced support for co-firing and tighter quality standards for pellets will come in next year
• Global wood pellet supply still plentiful but situation can change fast in Europe, where storage is limited, and plenty of new biomass capacity coming online in Asia + Europe
Concluding thoughts
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Copyright notice Copyright © 2019 Argus Media group. All rights reserved. All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence from Argus. Without limiting the foregoing, you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any form or for any purpose whatsoever without the prior written consent of Argus. Trademark notice ARGUS, the ARGUS logo, Argus publication titles, and Argus index names are trademarks of Argus Media Limited. For additional information, including details of our other trademarks, visit argusmedia.com/trademarks.
Claire Pickard-Cambridge Argus Asia solid fuels editorial manager
Claire.pickard@argusmedia.com
+65 6496 9994
Singapore
www.argusmedia.com
http://blog.argusmedia.com