Blog Post

Bringing transparency to the PKS market

by Rachael Levinson Sep 05, 2019

It is more than a year since I wrote my first blog on palm kernel shells (PKS) and since then PKS’s significance in the Asian biomass market, particularly in Japan, has only grown. In 2018, Japan imported over 1.3Mt of PKS, up from 26kt five years earlier. South Korea imported over 330kt in 2018, up from less than 5kt in 2012.

As expected, PKS continues to be an important fuel for many Japanese biomass power projects which are supported by the country’s Feed-in-Tariff (FiT). The large list of Japanese projects planning to use PKS continue to progress towards completion. However, because biomass projects must now apply via an auction system and deadlines for existing FiT-awarded projects are coming up, fewer new projects are likely to be announced in the future. All projects certified in 2017 must sign an EPC contract by end-2019.

It is clear that the Asian biomass market has developed over the last year and, although wood pellets by far remain the favoured option for long-term contracted biomass supply, more long-term contracts are now being signed for PKS too. The fragmentation of the PKS market and involvement of many small local players makes it difficult to find credible, bankable partners. The export market is dominated by small aggregators based in Malaysia and Indonesia, who collect PKS from numerous palm oil mills ready for export. Therefore, most PKS purchasing is done on a spot market basis. But the recent involvement of several Japanese trading houses, some with their own assets or partnerships with large, credible palm oil producers, is bringing improved bankability and security to the market and in the last couple of years we have seen a rise in the number of long-term offtake contracts being signed.

The highly fragmented PKS market makes it difficult to analyse and monitor. As mentioned, wood pellets still make up the majority of contracted biomass supply which means it is difficult to accurately estimate PKS demand. Most PKS will continue to be purchased on the spot market, in variable quantities depending on availability and price.

Until now PKS supply has seemed plentiful, but can it keep up with the expected demand and how much of it is sustainable?

To address some of this uncertainty we have used our regular visits to Asia, extensive network of contacts, and expertise in the biomass markets to develop our first multi-client report focussing exclusively on the PKS market. In doing so, we believe we have brought greater transparency to the market, providing information which can help end-users, traders and suppliers understand the supply and demand fundamentals over the coming years.

The report identifies the key PKS users and planned projects and expectations of their demand in the coming years. We include forecasts of demand out to 2030, as well as a breakdown of the status of planned projects.

In addition, we have analysed current PKS production and developed forecasts of how much PKS could be available for export in the coming years.

The report also includes a breakdown of PKS cost drivers and analysis of historical PKS price trends. For the first time in a multi-client report we have provided PKS price forecasts out to 2030.

All of which means this report will prove an invaluable tool to any participant in the Asian PKS market. For more information or to subscribe please visit here or get in touch at post@hawkinswright.com.

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