The forest fires in parts of Indonesia's Sumatra region over the past two weeks have had limited impact on the supply chain of biomass products such as wood pellets and palm kernel shells (PKS), according to market participants.
The key biomass supplying region of Indonesia reported multiple forest fire hotspots, including the Riau province, one of the region's seaborne transportation points. The forest fires, typically a result of land clearing activities on plantations for subsequent crop farming, was intensified by the current dry season in Indonesia.
The impact of the fires on PKS harvesting and processing in the plantations and mills has been minimal, according to some market participants. But the pollution from the haze might disrupt PKS logistics, if the forest fires do not subside soon, they added.
Transportation in plantations and to and from crude palm oil (CPO) mills could slow down if the visibility worsens, sources said. This could put pressure on the volume of palm oil fruit sent to CPO mills. The fruits are PKS feedstocks, and thus any drop in transported volume could lower PKS availability, a market participant said.
The fires have come at a time when the Sumatra region is witnessing lower-than-anticipated harvest. PKS collection in Sumatra have risen in July, but still short of suppliers' expectations, according to PKS traders in Indonesia.
The fires have resulted in transboundary haze in the west coast of peninsular Malaysia. The haze could affect operations at major ports in the key PKS supplying region of Malaysia, if the fires persist, market participants said.
The Indonesian PKS market has lately centred around slow harvest and demand from Japan. Argus assessed prices for PKS fob east coast Sumatra to Japan at $94.36/t, up from $83.87/t a year earlier.
