1.CellMark
2.Challenges Facing Supplier
3.Challenges Facing Traders
4.Opportunities
5.Summary Conclusions
CellMark
• Incorporated in 1984
• 65 offices in 30 countries
• 700 employees
• Presented in 120 markets
• Trading volume of 6 million tons
• Annual sales of USD 3+ billion
Main Focus
Pulp Paper Packaging Recycling
Chemicals
Metals
Energy Basic chemicals
CellMark specializes in sales and marketing and we bring a broad range of products, services and solutions to the world market. We focus our capabilities in these key areas:CellMark Energy plans to be a global leader in production and trade of Bio Mass
Source: www.cellmark.com
Bioenergy
• Employees in The U.S, Sweden, Italy, Singapore, Korea and Vietnam
• Involved in the bioenergy sector since 2010
• Moved 350,000 + tons in Asia since April, 2015
• Exclusive sellers for wood pellet plants in: Malaysia, and Indonesia and Vietnam
GPS• Formally known as Polima Compressed Wood Bintulu
founded in 2006
• Located in Bintulu, Sarawak Close to Deep Water Port (28 km) and Close to Raw material (60 KM radius)
• The state of Sarawak has large wood-based industries generating significant amount of wood residuals
• STIDC controls over 120,000 hectares of mature Acacia Plantation
• Capable of producing durable and premium quality wood products
Sara Rasa
• Founded in 2012
• By European Bio Energy Experts
• Located Surabuya Indonesia
• Raw Material residuals for legal logged industries
• CPM Pellet Mills
• 75,000 Capacity
Asia BioMass Corp
• Asia BioMass Corporation
• J/V between AVP amd CM
• Will Produce 84,000 MT per annum
• Located near significant wood waste.
• Start up 4Q 2017
Challenges Facing Supplier/Trader.
• Biggest Challenges
• Some apply only to Supplier and Some to Trader and often Both
• Raw Material
• Logistic
• Freight
• Quality
• Competition
• Legislation/Sustainability
Raw Material • Raw Material Procurement
• Logs
• Residuals from Plywood and Lumber Mills.
• Sawdust and Dominos from the Furniture Industry
• Wood Chips
• Don’t forget Wood has multiple uses unlike Coal
Raw Material • Logs
• Have Multiple Uses
• Dimensional Lumber
• Furniture
• Pulp and Paper
• Animal Bedding
• All higher value than current pellets
Raw Material
• Residuals from Lumber
• Dependent of the Lumber Business
• More and more the waste is being used internally
Raw Material • Furniture and Veneer
Industry Waste
• Again depends on the vagaries of the Furniture and Veneer Industry
• Currently a huge source in Vietnam as furniture companies are moving out of Indonesia and Taiwan
• Is this sustainable?
Raw Material
• Saw Dust
• Used to make Charcoal
• Used as growing Medium for Mushrooms
• Animal Bedding
• Hard to Store
• Often Dirty
Raw Material
• Wood Chips
• Current price for unprocessed wood chips is higher than pellet price
• MDF has higher value
• New Pulp Mill being built in Vietnam. Will use 1.6 million BDT of wood.
• What does that do to raw material price for pellets?
Japan and South Korea: Future Biomass Imports Demand Growth ScenarioDemand mostly imported wood pellets
Biomass in tonnes pellet equivalent and includes PKS and wood chip
Source: Indufor Analasys
Korean Tender • Tender Documents are Released
• Submit bid with 5% bid bond
• Tender has penalty for non conformance for Ash and NCV
• Winners submit delivery schedule with performance bond 10%
• Genco then tells you what delivery schedule they accept
• Deliveries are usually 300-500 MT per day over 3-6 months
• Winners ship to a warehouse and then redeliver.
Logistics• Logistics
• If we reach the forecast volume how are we going to meet the logistic requirement?
• Japan requires bulk shipment 7000 MT-25,000 MT per shipment
• Who can deliver to Genco’s in Korea at increased volume?
• Current system will not work.
Logistics
• Varies by End User/Market
• Bulk Shipment
• Bulk In Container
• Jumbo Bags in Container
• Small Bags (15-20 KG) in Container
Logistics Korea• Currently
• Supplier are selling on FOB
• Trader is handling
• Ocean Freight
• DDP delivery
• Inland Costs
• Storage
Logistics Korea Containers
• Lift Container to Dump Truck to be moved to Container Free Storage
• Delivery Pellets into Container Free Storage
Hooper or Dump Truck
• Dump Trucks are used based on end user requirement
• Hooper Trucks are used based on end user requirement
Logistics Japan • Will require Bulk shipment.
• Ranging from 7,000 MT Now to 25,000 MT Future
• Very little infrastructure to handle in SE Asia ports
• Cost is higher than Container
• Supplier charter a Vessel ??
• End User buys FOB ??
Freight
• Both Korean and Japanese customers want long term fixed price contracts. (FOB, CIF)
• Because of RPS and FIT
• If CIF how can Suppliers and Traders handle?
• Charter a Vessel?
Freight
• Cost of Freight
• Depends on Oil Price
• Supply and Demand
• Price of container freight is rising
• Hanjin Bankruptcy
• Merge of Container Lines in Japan
Quality• Trader has to buy from Multiple Sources
• To meet demand.
• Suppliers are Small to Medium
• Need to have Good Partners
• Quality Varies because Raw Material varies
Competition
• Rising Prices Mean
• Greater Chance NA producers come to Asia
• They have the Infrastructure
• They have the Scale
• Greater Competition from other Asian suppliers
Legislation
• The Pellet Market Potential in Asia is HUGE
• But Not Financially Driven:
• Will Korean and Japanese Governments stay the course?? Can they afford the cost
• RPS in Korea
• Has been pushed back once already
• FIT in Japan
• MITI meets in March to review current FIT system
Sustainability
• Very Hard to Achieve
• Multiple Sources of Raw Material
• Producers with FSC or PEFC Limited
• Will Market Pay the Price.
Infrastructure
• Port Services need to Improve
• Bulk shipments
• Load Faster
• Handle Bigger Vessels
Scale
• With the Forecast Volume
• Build Bigger Mills
• Need to Secure Raw Material.
• Forest Ownership
Quality
• We are Selling Energy
• Quality will be more important
• Industrial/Residential Grade
• Makes Economic Sense
• Fewer Possible Producers
Summary and Conclusions• The Potential Is Huge?
• Current Pricing Does Not Support New Investment:
• Price Currently is in most cases Below Production Cost.
• Most Sellers are Counting on Future
• Traders in Korea Speculate.
• Taking loss to gain Market Share
• Taking loss to reach Record Bidder Status
Summary and Conclusions• Pellets should not be compared Fuel Oil Or Coal.
• Wood has many other uses besides pellets
• Furniture, Paper, MDF, Plywood
• Remember you are Buying Energy not Tons
• Both Supplier and User are going to have get better at working towards WIN/WIN relationship.
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