Woodchip and Pellet Shipments Continue to Smash Records In Asia
There are very few commodities setting new records for trade volumes these days, but both woodchips (for pulp and wood panel production) and wood pellets (for energy) are enjoying strong growth. While lower costs of ocean freight have certainly helped this trade, the real drivers have been strong demand for both products in the importing countries.
This article is taken from a a report from RISI who are regarded as one of the most authoritative global source of forest products information and data.
In the Asia-Pacific region, the volume of woodchips imported from overseas sources reached new record volumes in 2007 and 2008, before tumbling about 20% during the financial crisis of 2009. In 2007, Japan accounted for nearly 92% of all woodchip imports in the region, but after 2009 demand in China began growing very rapidly.
The surge in woodchip imports in China propelled the market to record volumes in 2010, and new records have been set in every year since through 2014. And based on first quarter results, we can be quite confident that 2015 will see yet another new record volume, the eighth in the last nine years, Fig. 1. Japan was still the largest market in 2014, accounting for 53% of total imports in Asia-Pacific, but China now absorbs 40% of the trade, with the balance spread evenly between Korea, Taiwan and India.
Japan has been importing woodchips in bulk cargoes since the mid-1960s, while China began importing at the end of 2002. But India has only been importing woodchips since mid-2013. There is a much smaller trade in woodchips in the Atlantic region, to Turkey and Portugal from the USA, Canada, Brazil and Uruguay. This market is only about 8% of the volume traded in the Asia-Pacific region.
There are 11 countries that supply woodchips to the Asian markets. The largest share of supply (55-60%) is from Southeast Asia, primarily Vietnam, the largest single over-all woodchip supplier, Thailand and Indonesia. However, Australia, which was the top woodchip supplier for many years, has had a strong resurgence in woodchip exports to Asian markets in the past two years. This shift in the trade flows has been driven by several factors, including a sharp weakening of the Australian dollar and the announced policy of the Vietnamese government to reduce woodchip exports in favor of more “value-added” domestic processing. But a key driver of the change in woodchip supply sources to countries like Australia has been developments in the woodchip carrier fleet.
As of the beginning of 2011, there were 168 active woodchip carriers in the fleet, with a total capacity of 595 million ft3. (Woodchip carriers are specialized vessels with a much higher ratio of cubic storage volume to dead weight (dwt) capacity than normal bulk carriers. For example, a woodchip carrier that is around 64,000 dwt will have a cubic capacity of 4.3 million ft3, while a Panamax vessel of 77,000 dwt will have a cubic capacity of only 3.2 million ft3 and a Handymax vessel of 57,000 dwt will have a cubic capacity of only 2.3 million ft3.)
This was the largest the fleet had ever been, and followed one of the fastest expansions in the history of the woodchip carrier fleet during 2007 and 2008. But by early 2013, there were only 149 still active woodchip carriers, with total capacity reduced to 536 million ft3. The number of active vessels reduced further to 145 in early 2015, but due to the larger size of many of the new vessels, the total fleet capacity increased slightly to 538 million ft3.
The woodchip carrier fleet has traditionally been dominated by two very large players: Nippon Yusen Kaisha (NYK) and Mitsui OSK Lines (MOL). In early 2015, MOL owned 30% of the woodchip carrier fleet capacity and NYK had 28%. This is lower than in 2008 when the two combined accounted for 65% of woodchip carrier fleet capacity, Fig.2. The third-largest owner of woodchip carriers is now Nova Shipping, which currently owns 11% of the fleet capacity.
While growth in the woodchip trade has been impressive, the rapid increase in overseas shipments of wood pellets has been absolutely astounding!
Europe has been the main importing region for wood pellets as we have highlight in other articles, with demand driven by countries’ efforts to increase production of energy from renewable resources.
While Europe is by far the biggest market for wood pellet imports, the demand for biomass has more recently been accelerating in northern Asia as well. In particular, the South Korean market for wood pellet imports has expanded rapidly, with volumes jumping from only 30,000 tonnes in 2011 to 1.85 million tonnes in 2014.
Fig. 4. Growth in demand for wood pellet imports in Japan has been much slower than expected to date, but more than 60 wood biomass energy plants are scheduled to start operations in Japan in 2015 and 2016 due to the feed-in tariff which was introduced in the country in 2012. While most of these plants are planned to operate on thinnings from domestic forests and waste wood, most industry observers expect this new biomass demand to lead to increased demand for imports of either woodchips or wood pellets which is good news for regional pellet producers.