Thailand and Indonesia: Wood Pellet Producer & Market Snapshot

Thailand and Indonesia: Wood Pellet Producer & Market Snapshot

Thailand has several policies in place that help promote the production and
use of renewable energy, according to the International Energy Agency. In
2009, the government implemented the Renewable Energy Development Plan
(2008-'22) and in June 2015 the country passed the Thailand Alternative
Energy Development Plan (2015-'36).

Agriculture is big in Thailand. According to Chinese pellet mill maker
Zhengzhou Fanway Machinery Manufacturing Co. Ltd., which supplies biomass
and wood pellet mills to Thailand, in one year Thailand can produce 6
million tons of rice husk and more than 25 million tons of sugarcane
bagasse. Oil palm and wood wastes are two more sources of abundant biomass
in the country. The materials are primarily collected from rice, sugar and
oil palm mills, and the wood processing industries, respectively. Sugarcane
and rice are more concentrated in the northern and northeastern regions of
the country, while the southern region has higher concentrations of oil palm
processing.

As the pelleting of nonwood biomass in Thailand gains popularity, the
country's wood pellet manufacturing industry is rather established. "The
growing global demand of wood pellets, especially in the Asian Market,
stimulates the wood pellet manufacturing industry in Thailand," ZFMM states.
"There are many good, quality wood pellet producers in Thailand and most of
their wood pellets are exported to East Asia, such as South Korea and Japan.
Thus, Thailand has mastered the biomass pellet producing technology."

In 2014, Thailand exported nearly 111,000 metric tons of wood pellets,
according to the Food and Agriculture Organization of the United Nations
Statistics Division (FAOSTAT). In 2015, however, Thai exports of wood
pellets dropped considerably, to 25,429 tons. Contributing to Thai wood
pellet exports to Japan and South Korea is BioPellets Thailand Co. Ltd.

Company CEO Kitti Chulasamaya says, in 2015, BioPellets directly exported
600 tons to South Korea and 100 tons to Japan. This year, the company has
exported 400 tons to China, but it has changed how it does business compared
to previous years. "We are positioning ourselves to be a producer and not do
our own marketing," Chulasamaya says, "so we are selling to a trader."
Rather than selling direct into the Korean and Japanese markets, BioPellets
now primarily sells its wood pellets to traders who then determine where the
product goes.

BioPellets operates three pellet mills in Thailand with a total production
capacity of 18,000 tons, Chulasamaya says, adding that the company plans to
double capacity to 36,000 tons. The company uses rubber wood, eucalyptus,
local pine wood, leaucana, arcacia and some hardwood mix as feedstock,
Chulasamaya says.

According to FAOSTAT, Thailand's cumulative wood pellet production has grown
from 20,000 tons in 2013 to 115,000 tons in 2015.

Chulasamaya says domestic consumption of wood pellets in Thailand, mostly in
industrial boilers, is climbing each year, "especially for manufacturers of
public companies," he says. "But small industry has still not grown up much,
as they are concerned about the cost much more than the environment." He
says common boiler fuel continues to be oil and gas on the fossil-fuel side,
and palm kernel shells, wood chips, sawdust and other wood residues on the
renewable side. He says some power plants may eventually move to using wood
pellets, but today, if they are using renewables, it is often rice hulls and
wood chips.

FAOSTAT estimates that in 2013, Thailand imported about 1,000 tons of wood
pellets. This figure ticked up to 1,331 tons for 2014 and 2015.

On Thai policy to promote wood pellet production and consumption, the
National News Bureau of Thailand reported on Feb. 1, 2015, that the
government was considering a plan to promote the use of wood pellets in Thai
industry to lessen reliance on imported fuel. The plan included government
investment of 30 to 50 percent of the cost to replace factory boilers with
ones capable of utilizing wood pellets. "This move will help to increase
domestic consumption of wood pellets," ZFMM says. "Therefore, it is good
news for Thailand wood pellet manufacturers, especially ones who want to
start biomass pellets businesses. Along with the large amount of available
biomass resources, mature biomass pellet production technology and
affordable pellet making machines, it will promote the development of
Thailand's wood pellet market."

Chulasamaya says Thailand's industry ministry has the funds and budget for
factories seeking to change their oil or gas boiler to one that combusts
wood pellets, "but that government support is not announced well-enough, and
then people don't know," he says. "Moreover, that support is not just for
wood pellets, but for all renewable energy, of which most funds go to
support ethanol, solar and biogas."

He says wood pellet production in Thailand started only four to five years
ago, "but the first-generation of wood pellet investors, most of them shut
down their own factories due to technology problems, which has left less
than six [first-generation] producers," Chulasamaya says. "Some of them
turned to trading, and some of them that still operate are not full capacity
because they are fixing their own machines and running the [mill] for just a
routine and sell small amounts, but if you ask them to invest in new
technology, they would not for sure. Now [Thailand] is on the second- or
third-generation of pellet producers and the first-generation producers are
still involved as advisors," he says.

Indonesia

FAOSTAT data show that Indonesian wood pellet manufacturing doubled from
2013 to 2014, jumping from 40,000 tons to 80,000 tons in a year. Data
estimates suggest a leveling off in Indonesian wood pellet production in
2015, remaining at 80,000 tons. In total, Indonesia exported slightly more
than 37,000 tons in 2013, more than doubling to nearly 76,000 tons in 2014,
with FAOSTAT estimates at roughly the same tonnage for 2015. A majority of
Indonesian wood pellet exports are going to South Korea. According to a
presentation given Jan. 28 by Gordon Murray, executive director of the Wood
Pellet Association of Canada, at the Western Forest Industry Conference,
Indonesia exported 63,000 tons of wood pellets to South Korea in 2014 and an
estimated 61,000 in 2015, based on Global Trade Atlas data.

Interestingly, Indonesia imports of wood pellets also nearly doubled from
2013 to 2014, but volumes are extremely low. The country imported 18 tons in
2013 and 35 tons in 2014, according to FAOSTAT.

One Indonesian wood pellet producer is PT South Pacific. Steven Eyskens, the
director of PT South Pacific Indonesia who is of Belgian nationality, says
he's worked in Indonesia for more than 15 years, starting in wood production
and then opening a furniture factory producing furniture for export. "As I
am located in a main furniture area, I was running into several companies
that had waste problems with their sawdust and wood waste," he says. "After
communicating with several Korean companies, and a European pellet mill
manufacturer, we decided to start a pellet mill in 2013 when the Korean
market was booming."

PT South Pacific currently has one operating pellet mill in Indonesia, with
an additional four locations secured to build more factories, Eyskens says.
"We are running now a 10-ton-per-hour mill setup, which we will use as well
as a training center in the future to train the staff to work in the new
mills we are planning to build," he says. "As we grow, we are hoping that
from our four main target centers, we can produce up to 300,000 tons per
year."

Feedstock used by PT South Pacific for its wood pellets include wood waste
from furniture manufacturing, including coreboard, species of which are
albasia, mango, mahogany and pine. "For the past few weeks we have been
trying to work with the forestry department to put in plantations for
glericidia sepium, a fast growing wood species," he says. "I know some
colleagues who are pelletizing rubber wood and different hardwoods from
flooring and building industries."

Most of PT South Pacific's pellet production is exported to South Korea,
China and Japan, Eyskens says, "and we have buyers from Europe as well." One
big initiative at the company is local implementation of wood pellet cooking
stoves, called Mimi Moto, which has received a four-tier rating from the
Global Alliance for Clean Cookstoves-the highest ever received, Eyskens
says. The company is seeking distribution and nongovernmental organization
partners in the cookstove market.

SingPellet Pte. Ltd. is a pellet producer incorporated in Singapore and
operating in West Sumatra, Indonesia. Company director Wikkie Netten says
SingPellet's mill is scaled to produce up to 2,000 tons a month. "We are a
pellet producer that provides woody biomass to industrial-scale customers to
serve the Asian market," Netten says. "As we set our sights on becoming the
leading producer in Asia, we invest heavily in sustaining our feedstock
security. We target to provide long-term supply to our clients from our vast
21,000-hectare (51,892 acres) plantation." She says SingPellet is
test-bedding various species of short-rotation coppice for its replanting
program, an endeavor anticipated to provide future feedstock supply, though
the company currently relies on native species. She adds that all of the
wood pellets SingPellet manufactures are currently being exported to Japan.
"Long-term supply contracts and the scaling up of our production are in
negotiations at the moment," Netten adds.

Eyskens says 15 Indonesian wood pellet producers are registered to export to
China.

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Link to Original Article:
http://biomassmagazine.com/articles/13880/asian-wood-pellet-producer-market-
snapshot

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com