brodie govan halifax 5 november 2015 - pellet.org · brodie govan halifax 5 november 2015 • pvm...
TRANSCRIPT
• PVM is the world's leading independent broker of oil instruments and has been established for over 40 years.
• Has offices in Europe, Singapore and the USA • Daily turnover averages in excess of 100 million barrels of
swaps, forwards, futures and options. • Late 2012 started the diversification of the business into non
oil in order to become the worlds leading commodity house. • The group employs around 180 people globally • We now broker biomass, emissions, biofuels, coal and iron
ore.
Korean Industrial and Residen0al Wood Pellet Imports
SE Asia, 1,084,611
China, 287,063
North America, 406,238
Rest of World – 65,797
Vietnam 742,794 Malaysia -‐168,336 Thailand 110,752 Indonesia 62,729
Canada – 344,261 US -‐ 61,977
2014. 1.8mill tons
} The Korean renewable por/olio standard (RPS) has led to a rapidly growing wood pellet demand for co-‐firing.
} Market demand grew 300% during 2014. } Typical contracts are spot and contracts are
awarded through an aucIon process. ◦ Security of supply from sellers who do not
have capital or guaranteed fibre does not lend itself to long term contracts.
} Asia has been the largest supplier due to price with offers CIF Korea from Vietnamese suppliers at $100/t. US offers have been as high as $205 ◦ There have been issues with quality.
} In the future sustainability criteria, security of supply and pellet quality concerns may favour North American supply but not so far
Spot deals
from BC in
to Korea ra
nged
from $190-‐202/
t in 2014
Spot Wood Pellet Deals from BC to Korea in 2014
Korean Industrial and Residential Pellet Imports
Origin 2013 2014 Change on year %
Vietnam 157,226 742,794 372
Canada 79,795 344,261 318
China 25,676 287,063 1,018
Malaysia 78,420 168,336 115
Thailand 20,028 110,752 453
Indonesia 33,534 62,729 87
US 74,693 61,977 -17
Russia 76,941 34,756 -55
Australia 0 26,751 na
Japan 4,628 4,290 -7
Total 550,940 1,843,707 235
0
500,000
1,000,000
1,500,000
2,000,000
Imports
Wood Pellet Imports
2010 2011 2012 2013 2014 2015
Korean Pellet Imports and Historical Pricing
120
130
140
150
160
170
180
2010 2011 2012 2013 2014 2015
Cif US$/t
Cif US$/t
Imports Almost Quadrupled since
2013
But Prices Dropped by US$40-50/t……
Average Cif Korea price 2013-2014 (US$)
Vietnam Malaysia Indonesia Russia Thailand Canada
122.3 137.65 135.2 144.8 156.65 180.6
For 2015……
The Vietnamese and Thai Competition
Spot deals from Vietnam into Korea $100/t cfr - Container Freight $2-3/t
Korean Genco Kosep tender for 46kt in September
Spot deals from Thailand into Korea $105-110/t cfr - Container Freight $10/t
What does the policy say about what feedstock can be imported?
} South Korea's Forestry Promotion Institute (KFPI) checks the quality of wood pellets. } Government decided FSC and PEFC certification schemes were not adequate to test if pellets
made from hardwoods and not waste woods } The Government said it was not a sustainability issue but rather a chain of custody issue, to
trace the product
} Five days prior to the delivery at the discharging area, the Seller should provide the Buyer with a copy of certificates of quality.
} Quality checks performed only by firms accredited by Korea Laboratory Accreditation Scheme
} The biomass fuel must be wood fibre exclusively, without any type of binder and should not be chemically treated biomass. Wood fibre is defined as sawdust, shavings, round wood and bark from any species of woody plants.
} Upon request, seller must provide documents, including certificates, from the authorities of the exporting country, to demonstrate the legal status and current situation of the forest from which the fuel would be supplied.
What is the Korean Specification
Item Unit Limit of Range Diameter mm 6~8 Length mm Max. 32
Unit Volume Mass (As Received Basis kg/㎥ Min. 600 Total Moisture (As Received Basis) % wt Max. 10
Gross Calorific Value(As Dried Basis) kcal/kg Min. 4,300 Gross Calorific Value(As Air Dried Basis) kcal/kg Min. 4,200 Gross Calorific Value(As Received Basis) kcal/kg Min. 4,100 Net Calorific Value (As Received Basis kcal/kg Min. 3,900
Ash (Air Dried Basis) % wt Max. 3.0 Fines % wt Max 2.0
Durability(Strength) % Min. 95 Clorine (Air Dried Basis) % wt Max. 0.05 Sulphur (Air Dried Basis) % wt Max. 0.05 Nitrogen (Air Dried Basis) % wt Max. 1.0
Ash Fusion Temperature, IDT (Reducing Atmosphere) ℃ Min. 1,150
Biomass(As Dry Basis) % wt Min. 95
Trace Element
As
mg/kg
Max. 1.0 Cd Max. 0.5 Cr Max. 10 Cu Max. 10 Pb Max. 10 Hg Max. 0.05 Ni Max. 10 Zn Max. 100
Other Substance % wt Max. 2.0 DNA Test(Rice Husk) Negative
Japan } In Japan a feed in tariff (FIT) for renewable energy is incentivising the
development or conversion of biomass power plants. } The program requires utilities to purchase power generated from renewable
energy at a fixed price for a fixed period of time. Currently 20 years } FIT rates are determined every fiscal year (April 1-March 31) } Projects expected to come on line from 2017 } Certification and audits for sustainability is important. } Security of supply is important. } Torrified or waterproof pellets likely develop due to lack of storage. } Port restrictions means typical cargo size around 20-23kt. } Seeking reliable producers with a track record. Preference for Canadian. } Specs are I2 standard } Proof of sustainability, consistent with mutually agreed international
standards such as Sustainable Biomass Partnership and FSC the standard
Japanese Long Term Contracts
• Typical contract length ten years • Contract volume has been around 100-150kt/yr • FSC and SBP included in contracts now • Preference for Canadian producers at this stage • Preference is for Fixed Price and Simple Annual Escalator • European traders actively involved using Canadian offtake
The Competition…Vietnam Supply
q Only small percentage of certified product q Supply is fragmented and requires aggregators q Key producers are family groups q Typical producer supplies 5-10kt per month q Largest supplies up to 30kt a month from many mills q Shipped mostly in containers q Feedstock quality and cost varied and inconsistent q Reports old furniture is being used q Most can meet Korean specs of 3pc ash and 10pc moisture q Internal logistics are poor q Pulp, paper and furniture markets take priority of hardwoods q Korean traders are helping to part fund the certification process q Korea will not fully switch to other feedstocks like EFB/PKS until
they have confidence they won’t damage boilers
Key Vietnamese Ports and Freight
Ho Chi Minh
Dong Nai
Ha Noi
§ Typical Bulk Shipment 5kt § Most shipped in container (20ft) § Pellets trucked to Ports
Freight § 20ft Container - $1-5/t
Does Vietnam have capacity to produce more?
q Vietnam imports nearly 3.5 million cubic meters of wood annually, 65 percent of which is lumber for the wood processing industry
q There is 13mn hectare of forested area in Vietnam, with10mn Natural Forests and 3mn Plantations
q Competition and demand for materials has led to illegal and extensive deforestation at Natural Forests
q The hardwood plantations are Eucalyptus, Acacia and Pine but
are largely dedicated to the production of pulpwood q Vietnam has around 2,500 wood processing enterprises. Some
500 export wood products and only 200 have FSC chain of custody certificates but only a small number in Bioenergy
Supplier Capacity(month)
HDV 15,000
Phu Tai 15,000
Phuc Hy 5,000
Vinomig 4,000
What is the typical Vietnamese supplier and specification?
Korean Standard Moisture Max 10pc Ash Max 3pc Diameter 6-8mm Length 32mm Max Fines Max 2.0 Durability Min 95pc Chlorine Max 0.05 Sulphur Max 0.05
Vietnam Range Moisture 10-15pc Ash 1.5-3pc Diameter 6-8mm Length 20-40mm Fines 1-3pc Durability 95-97.5pc Chlorine 0.04-0.07pc Sulphur 0.03-0.07
Good News
q Trade dispute with Korea resolved q Korea imposed certification requirements. Canada could not
comply as was not member of the Apostille Convention q Second issue was Korea issued forest standards that didn’t
comply with ISO but now working to comply q Korea was asking for commercially sensitive fibre agreements
Threat of PKS
q Korea PKS imports up 5pc to 517kt to date q GS Group constructed 105MW plant in Korea based on 400kt of PKS q Indonesia and Malaysia key exporters q Heavy Indonesian tax may derail exports
China
} China is currently a net exporter of wood pellets.
} China’s current 5 year energy plan has a goal of reaching 11.4% renewables by the end of this year. (from 8.6% in 2010 and currently at around 10%)
} “In the first three quarters of 2014, China spent $175 billion on clean energy projects, a 16 percent jump from the previous year. This comes on top of the $54.2 billion invested in China’s renewable energy market in 2013, far more than any other country”*. (quote from Bloomberg New Energy Finance)
} Around 120 new plants are in the process of being built with a minimum capacity of 14MW
} China imported 327mill tons of coal in 2013. ◦ If China was have a 5% co-‐firing rate and 16% of plants were co-‐firing by 2020 they would
have a demand of around 38mill tons. (coal and pellet demand forecast by FutureMetrics.)
Broker View.....
In Vietnam competition from other sectors and poor infrastructure will stifle capacity growth and potential disaster around the corner
Sustainability and Certification Key to Japan but not Korea. Adoption of SBP needed
PKS will grow and challenge wood as primary feedstock
Vietnam will continue as key wood pellet supplier to Korea. Canada will remain largest Japanese supplier
Brodie Govan Biomass Broker
PVM Environmental Products Tel: 44 207 3891097
Thank You