KResearch views that the wood pellet market in Japan is expanding significantly to serve the local power sector. The demand for wood pellets in Japan is expected to increase to 5 million tons in 2022 from 1.2 million tons in 2019. However, Japan has the capacity to produce only 126,000 tons of wood pellets. Hence, Japan needs around 4.9 million tons of imports to meet the domestic demand.
KResearch believes that, thanks to Thailand's readiness in terms of raw materials and product quality, Thailand stands a good chance to increase the amount of wood pellet exports to Japan from 12,411 tons in 2018 to between 80,000 and 100,000 tons in 2020, if the wood pellet factories formed by joint ventures between Japan's power plants and Thailand's wood pellet producers begin operations. At the same time, Thai wood pellet producers may capitalize on the country's potential to expand their market to other countries with high demand for wood pellets and explore market opportunities.
Nonetheless, newcomers interested in investing in wood pellet production should also take into consideration the issue relating to the sustainability of raw materials for wood pellet production. Those in midstream and downstream industries may have by-products for wood pellet production, or wood pellet investors may have to partner with these midstream and downstream industries to ensure the sustainability of raw materials in the long term.