Wood pellet imports to Asia reached an all-time-high in the 4Q/16 when Japan and South Korea together imported 630,000 tons of pellets. Although import volumes were down slightly in the 1Q/17, they were still more than 40% higher than in the 1Q/16, as reported in the latest issue of the Wood Resource Quarterly (WRQ), Seattle, Wash., USA.

South Korea is by far the main destination for pellets in Asia, and in 2016, the country was the world's third largest importer of pellets, trailing only the U.K. and Denmark. Although import volumes to Japan have tripled from 2014 to 2016, the usage of pellets is still at a relatively low level (see WRQ for detailed trade data).

Consumption of pellets in Japan and South Korea has increased quite rapidly the past four years because of new government requirements, which favor reducing carbon emissions and increasing the usage of renewable energy. The recent trend in pellet usage is likely to continue in the future and is driven both by incentives (subsidies) and regulations (renewable energy portfolio standards). With an urgent need to replace nuclear energy and generous feed-in-tariffs, it is expected that Japan will increase importation of wood pellets quite substantially during the next five years.

Vietnam has been the major supplier of pellets to the Asian market for the past three years, accounting for almost two-thirds of the shipments to Japan and South Korea in 2016. Canada was an early supplier to the Asian market, but its market share dropped from 22% in 2014 to 14% in 2016. However, in the 1Q/17, Canada increased shipments to Asia to the second highest quarterly level on record, and the market share was up to 21%.

Import prices for pellets to South Korea fell dramatically from early 2014 to the summer of 2016, according to a recent WRQ Trade Snapshot report. The two-year long price decline ended in the 3Q/16, when prices slowly started to recover. The import prices continued their upward trend during the first four months of 2017 with Malaysian pellets increasing the most.

Global lumber, sawlog and pulpwood market reporting is included in the 52-page Wood Resource Quarterly. The report, which was established in 1988 and has subscribers in more than 30 countries, tracks sawlog, pulpwood, wood chip, lumber, and pellet prices, as well as trade and market developments in most key regions around the world. Subscribe to WRQ online.