the global outlook for wood pellet markets · hawkins wright hawkins wright the global outlook for...

HAWKINS WRIGHT

HAWKINS WRIGHT

HAWKINS WRIGHT HAWKINS WRIGHT

Theglobaloutlookforwoodpelletmarkets

WPACAnnualConference,O<awaSeptember2017

FionaMa<hews

HAWKINS WRIGHT

Consultantstointerna@onalpulp,paperandbioenergyindustries

www.hawkinswright.com

HAWKINS WRIGHT

Globalmarketoverview

HAWKINS WRIGHT

1.7 2.2 2.6 3.04.0

5.2

7.6

9.7

11.7

14.515.7

18.319.8

22.5

24.9

27.128.6

0

5

10

15

20

25

30

millionmetricto

nnes

+11%pa

Globalwoodpelletproduc@on

Sources:REN21,FAOandHawkinsWright

Note:Allfiguresareinmillionmetrictonnes(Mt)

•  2016sawthelowesteveryear-on-yeargrowth(+6%)

•  ThisresultedinclosuresandlowcapacityuBlisaBonatmanypelletmills

•  Howeverlow-costproducBoncapacitydidgrowinAsia

HAWKINS WRIGHT

Globalwoodpelletproduc@oncapacity,Q22017

Source:HawkinsWright,theOutlookforWoodPellets,Q22017

•  Total(industrial+heaBng)woodpelletcapacity=41.2Mt

•  EU=19.5Mt

•  US=12.3Mt

•  Canada=3.6Mt

•  Asia=1.8Mt 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0

US

Canada

Germany

Sweden

Latvia

Russia

Austria

Estonia

France

Vietnam

millionmetrictonnes

HAWKINS WRIGHT

EU2873%

OtherEurope3%

NorthAmerica18%

Russia&CIS4%

Asia2%

Globalheatingpelletdemandin2016=15.3Mt

Globalwoodpelletdemand,2016


EU2882%

NorthAmerica1%

Asia17%

Totalglobalindustrialdemandin2016=13.4Mt

•  Totalglobaldemandin2016=28.6Mt

•  Annualglobaldemandgrowthof+6%

•  +26%inAsia

•  +2%inEU28

HAWKINS WRIGHT

Toptenwoodpelletconsumingcountries,2016


HAWKINS WRIGHT

Asianwoodpelletdemand

•  WoodpelletdemandinAsiagrewby+26%,(+0.5Mt)in2016>  +19%inSouthKorea>  +37%inJapan

•  ProjectsinAsiaaregeWngbigger>  GunjangEnergybegan

operaBngin2016,requiring0.35Mt/y

>  KOEN’sYeongdongunit#1conversionbeganoperaBngthisyear,requiring0.5Mt/yofpellets


0.0

0.5

1.0

1.5

2.0

2.5

3.0

2013 2014 2015 2016

millionmetricto

nnes SouthKorea

Japan

OtherAsia

HAWKINS WRIGHT

Woodpellettrade

HAWKINS WRIGHT

0.53

0.14

0.18

0.21

0.24

0.25

0.34

0.39

0.90

1.53

1.94

7.07

OtherEU

Netherlands

Latvia

Slovenia

France

Sweden

Austria

Germany

Belgium

Italy

Denmark

UnitedKingdom

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0

milliontonnes

2016 2015

Europeanwoodpelletimports,2016

Source:HawkinsWright,theOutlookforWoodPellets

USA60%

Canada21%

Russia10%

Ukraine2%

Belarus2%

Other5%

•  ImportsfromoutsidetheEU=8.1Mt(ofwhichCanadasupplied21%)

•  ImportsfromwithintheEU=5.6Mt

•  Netimportsroseto7.3Mtin2016(+14%)

HAWKINS WRIGHT

Asianwoodpelletimports

•  Asianwoodpelletimportshaverisen+46%inH12017v.H12016>  Japan=0.23Mt>  Korea=1.04Mt>  TOTAL=1.27MtinH12017

•  Mainsuppliersare>  Vietnam(55%)>  Canada(12%)>  Malaysia(13%)

•  JapanesebuyersprefersecurityandsustainabilityofCanadianpellets

•  SouthKoreanbuyerswantlowercostpellets(i.e.Vietnamese)

SouthKorea:Woodpelletimportstonnes 2016 %chg15/16Vietnam 1,254,957 +23%Malaysia 199,077 +29%Russia 125,841 +50%Indonesia 75,854 +26%Canada 35,263 -60%Thailand 20,508 -42%Other 4,673 +1074%Total 1,716,172 +17%

Japan:woodpelletimportstonnes 2016 %chg15/16Canada 260,935 +79%Vietnam 62,441 +128%China 20,733 -64%Malaysia 1,418 +775%Thailand 503 +159%Indonesia 425 +40%USA 306 +29%Other 102 +89%Total 346,863 +49%

Source:Customsdata

HAWKINS WRIGHT

Recentmarkettrends

HAWKINS WRIGHT

0

10

20

30

40

50

60

70

80

90

EUR/MWh

Heatingoil

Woodpellets

TheEuropeanhea@ngmarketrebalancedmorequicklythanan@cipated

•  Colderweatherinlate2016andearly2017increasedpelletdemandforheaBnginEurope

•  Persistentlylow,butvolaBle,oilpricesweakenedtheeconomicargumentforpelletheaBngandreducedcustomerconfidencein2015-16

•  Butthishasimprovedoverthepastyear.Pelletswere8%cheaperthanheaBngoilinGermanyonaverageoverthelast12monthsAnalysisbasedondelivered(retail)pricesofheaBngoilandwood

pellets,includingtaxes.

Sources:DEPV(pellets);EUEnergyPortal(heaQngoil)

PricesofheaBngoilvspelletsinGermany

HAWKINS WRIGHT

60

70

80

90

100

110

120

130

Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17

Priceindex.Decem

ber20

13=100

DOLLARIndex

EUROIndex

CANADIANDOLLARIndex

Theindustrialmarkethasalsorebalancedin2017

•  Agermonthsofdepressedspotindustrialpelletprices,withlihletrans-AtlanBctrade

•  Upcomingnewsourcesofindustrialdemandandreducedpelletcapacitygrowthhaverebalancedsupply-demandandligedpelletprices

•  ThedepreciaBonoftheUSdollarhasimprovedthefortuneofUSproducers

•  BUT–spottradesaresBllveryinfrequent,contractedvolumesaccountformajorityofthemarket

Analysisbasedondelivered(CIFARA)spotpricesofindustrial-gradewoodpelletsinUS$withcurrencyconversion

Source:HawkinsWright,ForestEnergyMonitor

Indicesofindustrialpelletpricesindifferentcurrencies

HAWKINS WRIGHT

Theoutlookfordemand

HAWKINS WRIGHT

Newsourcesofindustrialpelletdemand-Europe

Name Loca@on Installedcapacity,MWe

Pelletdemand,Mt/y

Status

DongEnergy,Avedøre1 Denmark 250 ~0.4 BeganoperaBngend-2016

DongEnergy,Studstrup Denmark 245 0.5-0.8 BeganoperaBngend-2016

RWE/Essent,Amer9 Netherlands 340 1.2 DueonlineNov2017

UniperMaaslavkteMPP3

Netherlands 1100 0.5 Due2018

RWE/EssentEeemshaven

Netherlands 1600 0.8 Due2018

EngieRoherdam1 Netherlands 736 0.2 Due2018

EPH,Lynemouth UK 420 1.6 Dueearly2018

MGTPower UK 299 1.1 DueQ12020


HAWKINS WRIGHT

Newsourcesofindustrialpelletdemand-Asia

Name Loca@on Installedcapacity,MWe

Pelletdemand,kt/y

Status

KOENYeongdong#1 Korea 125 550 BeganoperaBng2017

Hanyang/KNHPGwanyangEnergy

Korea 220 500 Dueonline2020

KOENYeongdong#2 Korea 200 1,450 Plannedfor2020

KOMIPOGunsanBio Korea 200 800 Dueonline2020

NakayamaNagoya2 Japan 110 125 BeganoperaBng2017

SummitEnergySakata Japan 50 100 Dueonline2018

IHIKagoshima Japan 49 250 Dueonline2018/19

Aioi Japan 200 650 TBC

J-PowerTakehara Japan 600 250 Planned2020


ThisisjustaselecBonofthebiggestpellet-firedprojects,therearenumerousotherprojectsplannedinAsia(Over12GWeofbiomasspowercapacityiscerBfiedunderJapan’sFeedInTariffandrecentpolicychangesinKoreacouldresultingreaterrenewableenergydeployment)

HAWKINS WRIGHT

TheoutlookforindustrialwoodpelletdemandintheEUandAsia


11

20

2

9

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

2014 2015 2016 2017 2018 2019 2020 2021

millionmetricto

nnes

TOTALEU28

TOTALAsia 29Mt

13Mt

•  Asiandemandexpectedtoaccountfor31%ofindustrialmarketby2021

HAWKINS WRIGHT

Theoutlookforsupply

HAWKINS WRIGHT

Addi@onstoglobalwoodpelletproduc@oncapacity

Company Country Produc@oncapacity,kt/y Status

Tanac Brazil 400 Commissioning

SYEnergy SouthKorea 500 Commissioning

PlantaBonEnergy Australia 250 RestartedQ32017

HighlandPellets UnitedStates 150(4thlineatexisBngmill) DueonlineOct2017

DraxBiomass,AmiteandMorehouse

UnitedStates 150(75kt/ycapacityexpansionsateachmill)

Duelate2017

Graanul,BroceniandOÜOsulaGraanul

Latvia 150(newmillatBroceni)110(expansion)

UnderconstrucBon,due2017

AnViệtPhát Vietnam 200(expansionatexisBngmills)

UnderconstrucBon

Enviva,Hamlet UnitedStates 600 Duelate2018

Pinnacle,Entwistle Canada 400 Duelate2018

DraxLaSalle UnitedStates 500 Duetorestart2018


Note:Allfiguresareinthousandmetrictonnesperyear(kt/y)

HAWKINS WRIGHT

Addi@onstoglobalindustrialpelletproduc@oncapacity

Source:HawkinsWright,theOutlookforWoodPelletsQ22017

•  NetcapacityaddiBonshaveslowedinthepastyear

•  SomerecentcapacityclosuresorreducBons

•  Investmentenvironmentchallenging:fewerprojectsreachingfinancialclose

•  From2019,furthervolumeswillneedtobesoughttomeetindustrialdemandforecasts–eitherviatransferfromheaBngpelletmarketorthroughnewindustrial-focusedcapacityaddiBons

20.3 20.3

2.4 22.7

-

5

10

15

20

25

Currentcapacity(Q22017)

Underconstructionandfinanced

Futurecapacity(2019)

milliont/y

HAWKINS WRIGHT

Industrialpelletsupply-demandbalance

11

20

2

9

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

2014 2015 2016 2017 2018 2019 2020 2021

millionmetricto

nnes

TOTALEU28

TOTALAsia 29Mt

13Mt

Current+underconstruction industrial pellet capacity(~23Mt)

•  Approx6Mt/yofnewpelletsupplywillbeneededby2021ifdemandistoriseasexpected


HAWKINS WRIGHT

Conclusions

•  Ageradifficultcoupleofyears,supplyanddemandarenowmorebalanced>  Newdemandiscomingonline>  ProducBoncapacitygrowthhasslowed>  Fewerspotvolumesarebeingproduced(proorcon?)

•  AcBvityintheAsianmarketisrampingupfast,buthowwillthisdemandbesaBsfied?>  Koreantendersareextremelychallenging(logisBcs,price,specificaBon)>  Japanesebuyersarediligent(longtermsupplysecurity,sustainability,

bankability)

•  ThemarketmaynoBceablyBghtenasnewdemandcomesonline>  SignificantaddiBonalpelletcapacitywillbeneededifdemandistogrow

asexpected>  LowerinventoriesintheheaBngmarket(and/orcoldtemperatures)

maymeansmallervolumesavailablefortransfertoindustrialmarket

HAWKINS WRIGHT

TheOutlookforWoodPelletsDemand,supply,costsandprices

AmulB-clientservicecomprisingregularlyupdatedforecastsofthewoodpelletmarket’sdevelopment•  Two‘main’reports(Q1&Q3)•  Two‘update’reports(Q2&Q4)•  WorkshoporpresentaBonmeeBng•  Chartsandbackgrounddataonrequest

•  On-callresponsetoadhocqueries

W:www.hawkinswright.com

E:[email protected]

T:+447809888300

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