The Industry’s Second, More Challenging Act

The Japanese market will look nothing like the market in the U.K. There is no Japanese equivalent of Drax, and as a result, the industry and its logistical partners will have to find new ways to answer the same questions.
By Tim Portz | December 06, 2017

For the second time in two years, Japanese wood pellet demand dominated the conversations at the U.S. Industrial Pellet Association’s annual conference. This year, the conference was moved to Las Vegas, and most attendees attributed this to an interest in making the conference a little easier for, and a little more attractive to, Japanese attendees. While never officially confirmed by anyone from USIPA, deliberately shaping the conference to foster more dialogue with buyers in Japan would be hard to argue against.

On the conference’s opening day, Bill Strauss with FutureMetrics, quoted in our comprehensive review of the Japanese market inside this issue, presented a bar graph charting the growth of industrial wood pellet sector through 2025. The graph projected the industry to grow aggressively, at a rate of nearly 3 million tons per year. A closer examination of the chart reveals that this impressive growth trajectory hinges on Asian demand, predominantly in Japan and South Korea. His analysis shows pellet volumes in South Korea and Japan swelling to over 17 million tons by 2025, or roughly the size of the entire industrial market right now.

This issue of Pellet Mill Magazine makes it clear that while the policy drivers behind these anticipated volumes support industrywide excitement about the opportunity, the practical reality of growing these markets to their exciting potential is another thing altogether. Throughout the discussions in Vegas, I found myself comparing and contrasting the opportunity for the industrial pellet industry in Japan to the market that can be credited for the rise of industrial pellet production in North America in the first place—the United Kingdom.

While the industry may not have said so at the time, it could not have asked for a better customer to build itself upon than the Drax Power Station. Together, Drax’s scale and singularity answered many of the questions the industry is still struggling with in Japan. The investments that needed to be made in port logistics and rail transport could all be tied to Drax, and by extension, the financial support of the conversion by the British government. This derisking catalyzed massive investments and the expected volumes began to flow.

The Japanese market will look nothing like the market in the U.K. There is no Japanese equivalent of Drax, and as a result, the industry and its logistical partners will have to find new ways to answer the same questions.


Author: Tim Portz
Vice President of Content
& Executive Editor
tportz@bbiinternational.com