Exploring the changing global supply and demand dynamics of industrial pellets

Transcription

1 Exploring the changing global supply and demand dynamics of industrial pellets London Laura Tovey-Fall 18 April 2018 London Houston Moscow Singapore Dubai New York Beijing Kiev Tokyo Astana Shanghai Rio de Janeiro Washington DC Riga Calgary Brussels Cape Town Mexico City Berlin San Francisco Sydney Market Reporting Consulting Events

2 Argus Biomass Markets Launched in 2009 Includes weekly price assessments Commentary, news and analysis Freight assessments on key biomass trading routes Weather outlook Generation economics Copyright 2018 Argus Media Ltd. All rights reserved.

3 Argus Biomass Markets pricing Cif ARA spot price is the benchmark price for industrial pellets delivered into the ARA region Market survey draws on pool of producers, traders, brokers and buyers Index compiled from market survey, spot transactions and firm bids and offers Successful completion of five PWC audits (last audit September 2017) Argus index listed on EEX first trade on 15 January Copyright 2018 Argus Media Ltd. All rights reserved.

4 May 09 Aug 09 Nov 09 Feb 10 May 10 Aug 10 Nov 10 Feb 11 May 11 Aug 11 Nov 11 Feb 12 May 12 Aug 12 Nov 12 Feb 13 May 13 Aug 13 Nov 13 Feb 14 May 14 Aug 14 Nov 14 Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16 Aug 16 Nov 16 Feb 17 May 17 Aug 17 Nov 17 Feb 18 Argus 90 day cif ARA spot prices S/t Copyright 2018 Argus Media Ltd. All rights reserved.

5 Drivers of European industrial wood pellet demand Demand overview Market Reporting Consulting Events

6 Top wood pellet net importers 2017 Belgium 870,000t UK 6.8mn t Denmark 2.6mn t Italy* 1.8mn t South Korea 2.4mn t *mainly residential

7 UK wood pellet consumption Current demand mainly driven by Drax s biomass conversions Utility Plant Capacity Status Consumption Drax Units 1,2,3 645MW each Operating 7.5mn t/yr EPH Lynemouth 396MW Commissioning 1.6mn t/yr MGT Power Teesside 299MW Planned, expected 1Q20 Drax Unit 4 645MW To be converted in summer mn-1.2mn t/yr?

8 Belgium wood pellet consumption Maxgreen received 5 year extension from March 2018 Utility Plant Capacity Status Consumption Engie/MaxGreen Rodenhuize 180MW Operating 800,000t/yr Engie Les Awirs 80MW Operating 200,000t/yr

9 Netherlands planned wood pellet consumption Four projects successful in 2016 SDE+ subsidy round Utility Plant Capacity Co-firing Status Consumption* RWE Amer 9 600MW 80pc Testing, fully operational 3Q mn t/yr Uniper MPP3 1.1GW 15pc , ,000 t/yr RWE Eemshaven 2 777MW units 15pc , ,000 t/yr Engie Rotterdam 731MW 10pc TBC 500, ,000 t/yr *Argus estimates

10 Denmark wood pellet consumption Recent conversions have strongly lifted demand Utility Plant Capacity electric/heat Status Consumption Orsted Avedore 1 254MW / 359MW Operating 400,000t/yr Orsted Avedore 2 394MW / 541MW Operating 800,000t/yr Orsted Studstrup 3 362MW / 513MW Operating 600,000t/yr Hofor Amager 1 65MW / 360MW Operating 350,000t/yr Orsted Herning* 88MW / 171MW Operating 50,000t/yr *uses 30pc wood pellets, 70pc wood chips

11 European Wood pellet power plant capacity growth MW Orsted s Studstrup 3 EPH s Lynemouth Orsted s Avedore 1 Drax unit 1 RWE s Amer 9 Uniper s MPP3 RWE s Eemshaven MGT s Teesside 0 Start * 2019* 2020* UK Belgium Netherlands Denmark *Expected

12 Drivers of European industrial wood pellet demand Denmark: a closer look Market Reporting Consulting Events

13 Denmark wood pellet consumption Denmark s wood pellet use driven by heat demand Utility Plant Capacity electric/heat Status Consumption Orsted Avedore 1 254MW / 359MW Operating 400,000t/yr Orsted Avedore 2 394MW / 541MW Operating 800,000t/yr Orsted Studstrup 3 362MW / 513MW Operating 600,000t/yr Hofor Amager 1 68MW / 250MW Operating 350,000t/yr Orsted Herning* 88MW / 171MW Operating 50,000t/yr *uses 30pc wood pellets, 70pc wood chips

14 Denmark net wood pellet imports by month 2017 first full year for Avedore 1, Studstrup 3 Total net imports up by 33pc in 2017 Heat demand gives seasonal swing 000 t Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17

15 Winter HDD days in Copenhagen HDD days 600 1Q18 colder than the 10-year average Oct Nov Dec Jan Feb Mar yr average

16 Denmark wood pellet imports by month Heat demand gives seasonal swing 600 Net Danish imports 000 t pc increase in January 18 from a year earlier despite no new capacity Jan-16 Jan-17 Jan-18 Net wood pellet imports

17 Drivers of European industrial wood pellet demand Industrial heating demand Market Reporting Consulting Events

18 EU wood pellet consumption for heat Heat demand continues to grow Danish projects will have lifted 2017 still further European pellet demand for heating reached 13.4mn t in 2016 mn t Jan-13 Jan-14 Jan-15 Jan-16 Source: AEBIOM, Argus

19 EU wood pellet demand by sector mn t mn t Residential heat Commercial heat CHP heat CHP Power Residential heat Commercial heat 2017 likely even stronger as first full year with Orsted s new plants Source: AEBIOM

20 Top 5 consumers of wood pellets for heat t Italy Denmark Germany Sweden France Residential heat Commercial heat CHP heat Source: AEBIOM

21 * 2019* 2020* Biomass industrial heating capacity: Denmark, Finland, Sweden MW *expected Copyright 2018 Argus Media Ltd. All rights reserved.

22 Supply landscape Market Reporting Consulting Events

23 Top net wood pellet exporters 2017 Canada 2mn t Estonia 1.3mn t Russia 1.4mn t US 5.2mn t Latvia 1.6mn t Vietnam 1.5mn t

24 North America Largest supply region to Europe Larger vessels unsuitable for some ports Fx rate a consideration for European buyers Canadian producers looking to Asia as emerging demand centre Cold winter in New England has absorbed some domestic US and Canadian supply Consolidation among producers in recent years Some delays at planned supply projects Copyright 2016 Argus Media Ltd. All rights reserved.

25 North American exports mn t Canada US

26 North American export production capacity mn t/yr Enviva s Wiggins plant ceases Expansions at Drax s La Salle and Amite plants Highland Pellets Stevens, Enterprise plants due Enviva s Hamlet plant to start US Canada 4 NES Miramichi 2 Rentech s Wawa Pinnacle s Entwistle Pinnacle s Smithers plant to start plant idled ramping up plant due 0 End * 2019* Copyright 2018 Argus Media Ltd. All rights reserved.

27 Baltic region Both coasters and handysize vessels available Well placed to supply Scandinavian heating demand New capacity coming online Flooded forests => shortage of raw materials Copyright 2018 Argus Media Ltd. All rights reserved.

28 Portugal Fires damaged some production capacity Damaged wood from forest fires just becoming available Production mostly SBP controlled, not yet SBP compliant, so can t yet sell into all markets easily Mostly coaster freight can access all ports Forth coming capacity extensions Copyright 2018 Argus Media Ltd. All rights reserved.

29 mn t/yr Export production capacity in the Baltics and Iberia * 2019* Iberia Baltics * planned Copyright 2018 Argus Media Ltd. All rights reserved.

30 Supply-demand balance Europe s industrial wood pellet demand may reach 16mn t/yr by 2021 Installed production capacity in the US, Canada, the Baltics and Iberia should reach that level by 2019 Asia: the wildcard Copyright 2018 Argus Media Ltd. All rights reserved.

31 Asia outlook Market Reporting Consulting Events

32 Key wood pellet import and export countries South Korea is leading consumer in the region Japan is growing Vietnam is key producer Malaysia and Thailand supplier smaller volumes

33 mn t 3 North-east Asian wood pellet imports Japan South Korea Copyright 2018 Argus Media Ltd. All rights reserved.

34 South Korea Imports about 2.4mn t in 2017, demand likely closer to 2mn t Independent power producer projects starting up Most supply is secured by tender But REC weightings under revision, hearing planned on 20 April Copyright 2018 Argus Media Ltd. All rights reserved.

35 Future wood pellet demand mn t Yeongdong 2 conversion Yeongdong 1 conversion Hanyang- KNHP plant Komipo s Gunsan plant Kospo s Samcheok Bio

36 South Korea RPS targets %

37 Renewable Energy Credits (RECs) Power producers not subject to RPS can earn RECs Power producers can sell certificates for profit Incentivizing privatelyowned utilities to use biomass REC values under review Technology Biomass co-firing 1 - dedicated wood pellets Multiplier dedicated PKS 1 Biogas 1 Waste-to-energy 0.5 Solar >30kW 1 Solar <30kW 1.2 Onshore wind 1 Offshore wind <5km 1.5 Offshore wind >5km 2

38 t/yr South Korean imports 1,600,000 1,400,000 1,200,000 1,000, , , , ,000 0 Vietnam Malaysia Canada Russia Indonesia Thailand US Other Copyright 2018 Argus Media Ltd. All rights reserved.

39 Japan wood pellet imports FiT scheme pays 21yen/kWh for imported wood pellets Over 14GW of biomass projects have governmental approval Co-firing and dedicated projects in the pipeline Long term contracts for up to 15 years Biomass generation capacity forecast to 3100MW by 2028 from 2340MW currently (OCCTO) 000t

40 Recent and planned wood pellet projects Nakayama Nagoya 2 Operator: Osaka gas Capacity: 110MW 30pc co-firing Demand: 125,000t/yr Started: September 2017 Ishinomaki plant Operator: Nippon Paper and Mitsubishi Capacity: 149MW Up to 30pc co-firing Started: March 2018 Soma plant Operator: Orix Capacity: 112MW Up to 34pc co-firing Start date: April 2018 Akita plant Operator: Nippon Paper Capacity: 112MW Start date: 4Q18 Aichi plant Operator: Chubu Energy Capacity: 1070MW 17pc co-firing Demand: 500,000 t/yr Start date: By 2022 Yamaguchi plant Operator: Marubeni Capacity: 300MW Up to 20pc co-firing Start date: April 2022

41 New trade routes Market Reporting Consulting Events

42 Established wood pellet trade routes

43 Emerging trade routes To Japan From Canada

44 Freight Larger vessels have economies of scale for long distances But smaller vessels can reach a wider range of buyers Increasing spread between pellet price according to vessel size Diverse, flexible portfolio increasingly important

45 Laura Tovey-Fall Editor, Argus Biomass Markets London Stay +Argusmediaplus Argus-media argusmediavideo Copyright notice All intellectual property rights in this presentation and the information herein are the exclusive property of Argus and and/or its licensors and may only be used under licence from Argus. Without limiting the foregoing, you will not copy or reproduce any part of its contents (including, but not limited to, single prices or any other individual items of data) in any form or for any purpose whatsoever without the prior written consent of Argus. Trademark notice ARGUS, the ARGUS logo, Argus publication titles, and Argus index names are trademarks of Argus Media Limited. For additional information, including details of our other trademarks, visit argusmedia.com/trademarks.