South Korean utilities are expected to seek several cargoes of imported wood pellets for delivery in July-September to cater for an anticipated uptick in power demand.
As many as five utilities, including state-owned as well as independent power producers (IPPs), were looking to issue tenders this month for an estimated 368,000t of wood pellets across a wide range of quality — from industrial grade 3 (I3) to higher-than I2 quality pellets, market participants told Argus.
The tenders are expected to lift demand for wood pellet cargoes, especially from Vietnam, the largest wood pellet exporter in Asia. The uptick in demand from South Korea comes after it stayed largely muted over the past two months as several utilities underwent scheduled maintenance. Wood pellet consumption was also weak as moderate temperatures curtailed power consumption.
The upcoming tenders could also support South Korean imports. The increase in interest comes at a time when prices fell for six straight weeks until 28 May. The prices edged higher this week on expectations of the upcoming rise in demand. Argus assessed the fob Vietnam to South Korea market at $133.67/t fob Vietnam on 4 June, while the cfr Gwangyang price was marked at $140.45/t. The fob Vietnam to South Korea price slipped to $133.45/t on 28 May, having fallen consecutively since it was at $139/t on 16 April.
The demand from utilities could also support the domestic wood pellet market as power generators source a part of their requirements locally, especially if there is price arbitrage. Domestic wood pellet production totals 800,000 t/yr.
Tenders
An IPP opened a tender on 4 June for 40,000t of wood pellets with I3 specifications to be delivered in July cif Gwangyang, a market participant told Argus. The tender will close on 9 June, and tender results will be announced on 11 June. Another IPP is expected to launch its tender in the third week of June for the delivery of a total of 80,000t of wood pellets in August, a participant said. Yet another IPP will likely issue a tender for about 10,000t of pellets for delivery over August-September, according to a trader.
As many as two state-owned utilities are expected to issue tenders towards the end of this month to seek 70,000t and 168,000t of wood pellets, respectively.
Demand this month comes as utilities concluded two wood pellet tenders last week seeking around 140,000t of cargoes for delivery in July, according to a market participant in South Korea. The tenders were mainly for imported cargoes.
