What Korean pellet market?
November 20, 2013, Vancouver - The Wood Pellet Association of Canada (WPAC) 2013 AGM and Conference closed today with a focus on markets, and some surprise comments on the potential market for pellets in South Korea.
Arnold Dale, vice president of bioenergy with the Ekman Group, told the sold-out crowd that despite the excitement surrounding the Korean market, the reality will not likely be a booming market for Canadian producers. "The numbers look impressive, but the Koreans are astute business people. They will not pay more for their pellets than need be. I expect they will source most of their pellets from southeast Asia, taking only what they absolutely need from Canada."
Dale noted that studies from Jaakko Poyry predict massive volumes coming out of eastern Russia to meet this demand as well, but the pellet trader views those predictions with a healthy dose of skepticism. "I know the guys at Poyry, and they are smart people, so they must know something about what's going on. Russia has massive volumes of fibre, but the infrastructure just isn't close to being there."
Dale also gave delegates an insider's look at the growing Russian pellet industry. Of particular interest is the use of smaller, shallow draft vessels to move large volumes of raw material great distances to Russia's larger pellet mills. "Rail is a cost effective way to move raw materials, no doubt, but we're seeing fibre moved great distances very cost effectively using these smaller vessels in Russia."
Ruth Sharpe of Argus Biomass Markets also presented in the morning's first markets session, looking at the growing market for pellets in the UK. Despite instability, the bottom line is a reasonable potential for another 20 million tonnes of demand to fuel the UK's utility market in the next few years.
Like others at the conference, Sharpe expects to see the gap between industrial power and residential heat markets close in the coming years, as the latter continues its rapid growth. Several Canadian producers from both west and east told Canadian Biomass they are playing in this space already, yet the Italian bagged market continues to report shortages.
The 2013 WPAC AGM and Conference drew over 300 participants in all, spanning a buyers' breakfast, sold-out Fibreco tour and UBC pellet workshop on Monday, bustling receptions on Monday and Tuesday evenings, conference on Tuesday, and conferences and more tours on Wednesday. Stay tuned for details on a possible repeat for 2014.