South Korea imported fewer wood pellets in July as renewable energy credit (REC) spot prices continued to drop.

South Korea imported 225,000t of wood pellets in July, down by 2pc on the month and 24pc lower than the 297,000t imported in July 2018. The country's demand for imported wood pellets has been decreasing since April this year.

A majority of South Korean independent power producers (IPPs) are not obligated to fulfil the country's renewable portfolio standard that power producers with capacity of more than 500MW face. But IPPs co-fire wood pellets with coal to earn RECs to sell on the spot market. The recent lower REC spot values have reduced the profitability of selling RECs on the spot market for IPPs and diminished their appetite for co-firing.

The average of REC closing prices on the spot market was 64,100 won/REC ($52.77/REC) in July, down by 7pc from the average closing spot price of W68,986/REC in June. Energy produced from burning 1t of wood pellets is understood to earn 1.5-1.7 RECs.

The impact of weakened demand was also reflected in the recent downturn in Argus' spot price for industrial Vietnamese wood pellets. The average fob Vietnam wood pellet price was $82.90/t in July — down by 15pc on the month. The spot price for industrial Vietnamese wood pellets has continued to fall since and was assessed at $74/t fob Vietnam on 14 August.

South Korea imported 151,000t of wood pellets from Vietnam in July, down by 1pc on the month and by 22pc on the year.

Vietnam remained South Korea's largest wood pellet supplier, accounting for 67pc of imports in July, despite the drop.

Malaysia accounted for the second-largest share with 44,000t — 16pc and 14pc declines on the month and year, respectively. Malaysia accounted for 19pc of South Korean pellet import in July, up by 2 percentage points on the year.

Thailand, Indonesia and Russia were South Korea's third-, fourth- and fifth-largest suppliers in July, accounting for 14,000t or 6pc of imports, 9,000t and 4pc of imports, and 7,000t and 3pc of imports, respectively.

South Korea wood pellet imports t