Indonesia, Malaysia PKS biomass exports to Japan rising

Indonesian and Malaysian exports of palm kernel shells (PKS) to Japan increased on the year in January-March, as new dedicated biomass power plants began commercial operations in the country at the beginning of this year.

Indonesia exported 551,000t of PKS to Japan in January-March, up by 47pc on the year, while Malaysia's PKS exports to Japan rose by 65pc to 174,000t.

Japanese biomass power producer and supplier eRex began commercial operations at its Buzen and Ofunato units in early January, after commissioning in 2019. The Buzen plant burns 300,000 t/yr of wood pellets and PKS, while Ofunato burns mainly PKS.

Despite the strong increase in shipments to Japan, Indonesia's overall first quarter PKS exports dipped by 4pc on the year to 702,000t, as South Korean and Thai demand weakened.

Malaysia's overall PKS exports grew by 77pc on the year to 204,000t in the first quarter.

Indonesia shipped just 64,000t of PKS to South Korea in the first quarter, down by 34pc on the year and on the quarter. Its exports to Thailand decreased by 75pc on the year and by 61pc on the quarter to 57,000t.

In Thailand, PKS is mostly used in industrial biomass boilers, including in the food, textile and paper industries. The country's PKS demand is particularly price sensitive as consumers have the flexibility to switch their fuel to oil, wood chips and wood pellets. Strong Indonesian PKS prices and sharp rises in export payments in the first quarter likely quelled Thai PKS import demand. The fob east coast Sumatra PKS spot price closed the quarter at $103.14/t on 25 March, up by almost $19/t since the end of 2019.

Spot Indonesian PKS values rose sharply at the beginning of 2020, as an increase in crude palm oil (CPO) prices in January resulted in a $10/t increase in the country's PKS export levy. Indonesia's PKS export tax payments rose by another $4/t in February amid a further increase in the CPO benchmark price. And despite a $1/t decrease in March's export taxes, Indonesia's PKS spot price continued to climb as a result of tight supply.

Meanwhile, Malaysia sent 29,000t of PKS to Thailand in January-March, more then three times higher on the year. Unlike in Indonesia, Malaysia's PKS exports are not subject to export levies and taxes.

Indonesia also sent 19,000t of PKS to Singapore and 6,000t to Taiwan in the first quarter.

By Sam Hong