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Asia to drive pellets demand over the next decade – RISI

Western Europe has long been the world’s largest market for wood pellets used in heat and power production. But Asian industrial demand, driven by Japan and South Korea, is set to average 18 percent annual growth for the next decade This geographic shift in demand growth will reshape the flow of exports from top producers Canada and the United States (US), according to a new study published by RISI Inc., a leading information provider for the global forest products industry.

Entitled “Global Pellet Demand Outlook“, the study highlights a 10-year demand outlook and explores nation-specific policy dynamics and other macroeconomic factors that will reshape the flow of exports from top producers Canada and the US.

All biomass pellet markets have grown steadily for the past five years, but Asia will sustain rapid expansion as Europe’s industrial consumption plateaus. Government policies in Japan and South Korea will keep driving industry’s conversion to renewable energy sources. Biomass pellets already provide 12 percent of Japan’s industrial energy needs, and we expect that market share to more than double to 31 percent by 2028, said Sarah Martin, RISI Associate Economist for Bioenergy and author of the new study.

Pellet demand is affected by many external factors, including government policies, market prices for competing energy sources, and the severity of winters. Each of these factors will affect key pellet-consuming nations differently over the next decade, as detailed by the study.

Over the next few years, Europe’s ongoing trend of converting coal-fired power plants to burn pellets will continue – but after 2026, expected policy changes are forecast to cause a decline in industrial power demand, Martin said.

Europe’s use of pellets for heat, however, should keep growing through 2028. While the US and Canada are the largest producers of pellets for export, North America has historically been a less significant source of demand.

We do forecast 5 percent annual growth in pellet volumes for North American heating through 2028, but Asian industrial demand, for example, will average 9 percent growth over the same period – from a larger base. More significantly, by 2028, Asia’s expected industrial pellet consumption of 18 million tonnes will nearly equal Europe’s industrial volume of 18.3 million tonnes annually – an important shift that will reshape the dynamics of the entire industry, said Martin.

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