Indonesias Wood Pellet Exports To South Korea

1. Why is South Korea a Major Export Market for Indonesian Wood Pellets?

South Korea is the largest and most importantexport destination for Indonesian wood pellet producers. Recent data shows that South Korea accounts for approximately 86% of Indonesia's total wood pellet export value, placing it far ahead of second-place Japan at 14%. This ratio is no coincidence—structural factors in Korea's energy policy create substantial and sustained demand for imported biomass, including from Indonesia.

Unlike Japan, which is more selective about quality and prioritizes proven supply chains, the South Korean market has its own unique characteristics: massive demand scale, a subsidy structure based on renewable energy certificates (RECs), and buyer behavior that is directly influenced by government policies through the Ministry of Trade, Industry, and Energy (MOTIE).

Understanding the Korean market isn't just about knowing "where the wood pellets are going" — it's about understanding the energy policy ecosystem of a developed industrial nation transitioning to clean energy, and how Indonesia fits into that ecosystem.

2. Market Overview: Latest Data and Trends

Korea's Wood Pellet Imports See Tremendous Growth

South Korea's rise as a net importer of wood pellets represents one of the most dramatic growths in the global renewable energy trade. Korea's wood pellet imports, which were virtually insignificant before 2012, surged from about 122,400 tons in 2012 to 3.4 million tons in 2021 , accompanied by a roughly 24-fold increase in import value, reaching about US$439 million in 2021. By 2024, Korea was importing more than 4 million metric tons of wood pellets annually—making it one of the world's largest importers alongside Japan and the United Kingdom.

Indonesia's Position in the Korean Market

Indonesia is not the largest supplier of Korean wood pellets overall—Vietnam and Russia dominate total volume. However, Indonesia has been the fastest-growing export market in recent years. Indonesian wood pellet exports to South Korea have experienced exponential growth: from around 50 metric tons in 2021, they jumped to over 68,000 metric tons in 2023. The average annual growth rate of exports (volume) to Korea during the 2012–2024 period is considered very high.

In terms of price, the average export price of Indonesian wood pellets to all destinations was around $99 per ton in 2024 , down 18.4% compared to the previous year, indicating price pressure in the global biomass market due to oversupply and changes in Korean policy.

Major Suppliers Compete with Indonesia

Indonesian exporters compete primarily with:

• Vietnam — Korea's largest supplier, with production growing from 50,000 tonnes (2012) to 3.5 million tonnes (2021)
• Russia — has a cost advantage in wood raw materials
• Malaysia — especially for PKS (palm kernel shell) based pellets, which are now subject to increasingly strict regulations.

3. Key South Korean Regulations That Exporters Must Understand

Nothing is more crucial to the export opportunities of wood pellets to Korea than understanding its Renewable Portfolio Standard (RPS) and Renewable Energy Certificate (REC) system .

Renewable Portfolio Standard (RPS)

The RPS is a mandatory policy for operators of power plants with a capacity of 500 MW or more in Korea to supply a certain amount of renewable energy annually. MOTIE has set a steadily increasing RPS target: from 9% in 2022 to 10% in 2023–2024, with plans to reach 20.5% in 2025 and 25% in 2030. This obligation is driving Korean electric utilities to purchase and burn wood pellets on a large scale.

Renewable Energy Certificates (REC)

To meet RPS obligations, utilities can acquire RECs —government-issued certificates per megawatt-hour of renewable electricity generated. These RECs can be obtained from their own facilities, purchased from renewable energy developers, or traded on the REC market. REC weighting varies depending on the energy type:

• Domestic unused forest biomass: weight 1.5–2.0 (highest)
• Dedicated biomass burning (old facility): weight 1.5
• Co-firing (coal-biomass mixture combustion): lower weight

This difference in REC weighting is what has made wood pellet imports from Southeast Asia so profitable for Korean utilities for years. Foreign biomass carries an REC weighting, making it financially more competitive than many other renewable energy sources.

Sustainability Regulation

It's important to note that biomass imported into Korea is not subject to the same stringent sustainability requirements as those in Europe (such as RED II in the EU). Korea currently only requires documentary-based proof of legality —meaning, exporters must be able to prove that the wood they use is legally sourced, but there is no universally mandated ecological sustainability certification.

This differentiates Korea from the EU (which requires ENplus/FSC) and is one of the reasons why the Korean market is more open to Indonesian producers with a relatively simple certification basis.

4. REC Reform December 2024: Major Impact for Indonesian Exporters

December 18 , 2024, marked the most crucial moment in the dynamics of Indonesia-Korea wood pellet exports in recent years. MOTIE, together with the Ministry of Environment (ME) and the Korea Forest Service (KFS), announced a major reform of the REC system for biomass.

What Changed?

For state-owned power plants:

• RECs for six state-owned co-firing plants expire in January 2025
• The REC weights for the three state-owned dedicated biomass power plants are being gradually reduced: from 1.5 to 1.0 (2025), 0.75 (2026), and 0.5 (2027).

For private generators (Independent Power Producers/IPPs):

• REC weights for six private co-firing plants will be phased out over the next decade
• The 1.5 weighting for 12 private dedicated biomass power plants will be reduced to 0.5 in the next 15 years.

For new generators:

• From 2025, new biomass plants will no longer be eligible for RECs at all.

Immediate Implications for Indonesian Exporters

The impact is two-way and needs to be understood with nuance:

Short term (2025–2027): Export demand could actually increase temporarily . State-owned utilities are encouraged to maximize production while REC weights remain high, increasing the demand for spot cargoes of wood pellets. Argus Media reports that biomass-fired generation at some utilities could increase by 10–15% by 2025.

Medium-to-long term (2026+): Korea's overall import demand will trend downward . Three major private co-firing companies—SGC Energy, Hanwha Energy, and OCI SE—have announced a shift from imported wood pellets to domestic biomass starting in 2025, which is expected to replace approximately KRW 2.6 trillion worth of wood pellet imports.

The policy signal is clear: Korea is structurally reducing its reliance on biomass imports . Indonesian exporters need to anticipate this shift with a well-thought-out market diversification strategy.

5. Wood Pellet Quality Requirements and Standards for the Korean Market

Technical Specifications Requested by Korean Buyers

Korean buyers—especially large power generation utilities—generally require technical specifications that adhere to international standards. The main parameters commonly requested are:

The Korean market is generally more flexible regarding quality specifications than Japan. Japan requires premium quality approaching the ENplus A1 standard, while Korea tends to accept industrial-grade wood pellets with sufficient calorific value for co-firing and dedicated burning.

Indonesia's Most Popular Wood Pellet Raw Materials

Several types of raw materials for Indonesian wood pellet production that are competitive in the Korean market include:

• Sengon (Albizia chinensis) — fast-growing, widely available, low production costs
• Red calliandra (Calliandra calothyrsus) — high calorific value of around 4,700 kcal/kg, suitable for co-firing
• Wood industry waste — sawdust, wood chips from the furniture and wood processing industries

6. Documents and Certifications Required for Export

Mandatory Certification from the Indonesian Side

1. SVLK (Timber Legality Verification System) / VLHH SVLK is a mandatory timber legality certification established by the Indonesian government through the Ministry of Environment and Forestry. All exporters of wood products from Indonesia, including wood pellets, are required to have an S-LK (Timber Legality Certificate) certificate to obtain the V-Legal document required for customs export. SVLK proves that the wood used in the product comes from a legal source and can be traced from upstream to downstream.

For exports to South Korea, the document used is the V-Legal (not the FLEGT License — which is used specifically for exports to the EU/UK). The V-Legal is issued by an Independent Assessment and Verification Institution (LPVI) accredited by KAN.

2. Standard Export Documents

• Export Notification of Goods (PEB) / Customs Export Declaration
• Commercial invoice
• Packing list
• Bill of Lading (B/L) atau Airway Bill
• Certificate of Origin (Certificate of Origin of Goods)
• Phytosanitary Certificate (Phytosanitary Certificate) — required because wood/wood products have the potential to carry pests
• Quality analysis from accredited laboratories

Documents Required on Korean Side (Importer)

Korean buyers generally require:

• Quality Certificate / Test Report from an accredited independent laboratory
• Biomass Sustainability Documentation — proof of legality of wood sources (SVLK/V-Legal from the Indonesian side is generally accepted)
• Bill of Lading and complete shipping documents
• Korea Customs Import Declaration (handled by importer/buyer)

Because Korea does not yet require full ecological sustainability certifications such as FSC or the Sustainable Biomass Program (SBP) for all contracts, Indonesian exporters with SVLK certification can already enter the Korean market. However, larger, reputation-conscious buyers—especially those facing public pressure over deforestation issues—are increasingly requesting additional certifications such as FSC or PEFC as an added value.

7. Process and Flow of Wood Pellet Exports to South Korea

General Export Flow

1. Kontrak Jual-Beli dengan Buyer Korea
   ↓
2. Produksi & Quality Control (sesuai spesifikasi kontrak)
   ↓
3. Pengurusan Sertifikasi (SVLK/V-Legal, Phytosanitary, CoO)
   ↓
4. Pengapalan (Bulk carrier / Bagged)
   ↓
5. Penerbitan Bill of Lading & Dokumen Pengapalan
   ↓
6. Pembayaran (Letter of Credit / T/T)
   ↓
7. Customs Clearance di Korea oleh Importir
   ↓
8. Penerimaan di Pelabuhan Korea (Incheon, Busan, dll.)

Shipping Mode

Wood pellets for the Korean market are generally shipped as bulk cargo using bulk carriers ranging from Handysize to Supramax, depending on the contract volume. Some smaller contracts use containers. Major loading ports from Indonesia include Makassar, Gorontalo, Tanjung Emas (Semarang), and Tanjung Priok (Jakarta), depending on the location of the production plant.

Major destination ports in Korea include Incheon, Pyeongtaek, Gunsan, and Yeosu — generally close to power plants that use wood pellets.

Commonly Used Incoterms

• CFR (Cost and Freight) or CIF (Cost, Insurance, Freight) to Korean port — most common for spot contracts
• FOB (Free on Board) from Indonesian port — used if Korean buyer arranges shipping himself

8. Who Are Buyers in Korea? Understanding Korean Buyer Behavior

Main Buyer Type

1. State-Owned Power Companies (SPPs) This is the largest and most structured segment. Companies such as Korea Midland Power (KOMIPO), Korea Western Power (KOWEPO), Korea South-East Power (KOSEP), Korea East-West Power (EWP), Korea Southern Power (KOSPO), and Korea Hydro & Nuclear Power are subsidiaries of KEPCO (Korea Electric Power Corporation) that are bound by RPS obligations and are the largest buyers of imported wood pellets. They generally purchase through long-term contracts of 1–3 years or open tenders.

2. Private Independent Power Producers (IPPs) Private companies such as GS EPS, OCI SE, SGC Energy, and Hanwha Energy are also significant buyers. IPPs tend to have greater flexibility in decision-making and are sometimes more open to spot contracts or direct negotiations with new exporters.

3. Trading Companies: Many Indonesian exporters do not deal directly with Korean utilities, but rather through trading companies that act as intermediaries. Several Japanese and Korean trading companies (such as Hanwa Co., Ltd.) are active in the Indonesia-Korea biomass market. This channel is more accessible to new exporters, but the margins received by exporters are thinner.

Buyer Behavior: What Differentiates Korea from Japan?

Korea is a more price-sensitive and volume-oriented market . Korean buyers prefer suppliers who can guarantee large volumes at competitive prices and documented legality. This differs from Japanese buyers, who prioritize premium quality and long-term relationships based on trust.

9. Compliance Challenges and Issues to Watch Out For

Legality Issues and Problematic Export Practices

Indonesian wood pellet exports to Korea are not without serious controversy, which business owners seeking to conduct business responsibly and sustainably should be aware of. The Indonesian civil society coalition has noted illegal, unreported, and unregulated (IUU) export practices in the wood pellet supply chain to Korea and Japan.

Between October 2023 and August 2024, several Indonesian provinces—including Central Java, East Java, and Gorontalo—were involved in wood pellet exports to Korea and Japan, totaling approximately 102 million kg worth US$13.4 million . Several compliance issues were identified. The most prominent case involved unauthorized transhipment in Gorontalo waters, where foreign vessels loaded and unloaded outside the permitted area.

Implications for compliant exporters: This IUU practice damages the reputation of the Indonesian wood pellet industry as a whole and makes it difficult for properly operating exporters to gain the trust of Korean buyers.

Reputational Pressure and Deforestation Issues

Indonesian biomass destined for Korea has come under increasing scrutiny from the international NGO community due to alleged links to deforestation in Kalimantan and Sulawesi. Nearly all biomass from forests cleared for wood pellet production since 2021 has been shipped to Korea and Japan. This pressure is already having an impact: deforestation issues were one of the main reasons driving Korea's REC reforms in December 2024.

For exporters looking to build long-term business in the Korean market, sustainability certifications like FSC (Forest Stewardship Council) or SBP (Sustainable Biomass Program) are no longer just a value-add — they are increasingly becoming entry points to a more premium buyer segment that is resistant to reputational risk.

Price Volatility and Policy

Wood pellet prices in the Korean market are heavily influenced by the REC weights set by MOTIE . When the REC weights were lowered in 2018, the average import price fell from $152 to $125 per ton. The December 2024 REC policy change has already raised similar concerns—particularly from Vietnamese suppliers—about a short-term surge in demand followed by a drastic decline.

Indonesian exporters must be careful in planning production capacity and not expand massively based solely on spot demand that may be temporary.

10. Strategy to Penetrate and Maintain the Korean Market

1. Strengthen the Certification Foundation

The first and most important step: ensure you have SVLK/V-Legal certification and keep it up to date. To target tier-1 buyers (large utilities), start investing in FSC Chain of Custody ( SBP ) certification —this is an increasingly important competitive differentiation as reputational pressures increase in Korea.

2. Build Direct Relationships with Buyers

Don't rely solely on trading company intermediaries. Attend international biomass exhibitions and forums such as World Bioenergy Association (WBA) events or Korea-specific industry gatherings. Korean buyers, especially private IPPs, are more open to new suppliers who can demonstrate capacity, consistent quality, and document compliance.

3. Focus on Consistency of Quality and Volume

Korean utilities purchase in large volumes and have tight delivery schedules. The ability to ensure consistent specifications from batch to batch and meet delivery schedules is a key differentiator. Invest in a standardized quality control system and choose a reliable shipping logistics partner.

4. Diversification Don't Depend 100% on Korea

Given the long-term downward trend in REC weighting in Korea, it is crucial not to allocate all production capacity to the Korean market alone. Potential markets for diversification include Europe (with ENplus certification), Japan (with premium quality), and Indonesia's own growing domestic market through PLN's co-firing program.

5. Take Advantage of Cost and Geographic Advantages

Indonesia has real competitive advantages: lower raw material and labor costs compared to Europe or North America, and relatively short delivery times to Korea (around 5–10 days from eastern Indonesian ports) compared to suppliers from Russia or Canada. Exploit these advantages in your pricing strategy.

11. Outlook: The Future of Indonesia–Korea Wood Pellet Exports

Short Term (2025–2026): Opportunities Amidst Transition

The REC reform, which will take effect in 2025, creates a short-term window of opportunity : Korean state-owned utilities are encouraged to maximize production before REC weightings decline further, driving higher-than-usual spot cargo demand. This is an opportune moment for exporters with existing certification and production capacity to enter or expand spot contracts.

Medium Term (2027–2030): Gradual Decline

Korea's overall wood pellet import volume is expected to decline gradually as the weighting of RECs for existing facilities is reduced. Korea is pursuing a 21.6% renewable energy target by 2030—but the new policy focuses more on solar and wind , rather than imported biomass. Indonesian exporters should project this decline in their medium-term business plans.

Positive Uncertainty Factor

There are several factors that could maintain or even increase Korean demand beyond baseline projections:

• The Lee Jae-myung administration (starting June 2025) is emphasizing the acceleration of renewable energy and "RE100 industrial complexes" — which could mean the continued need for biomass in the transition phase.
• Korea's limited domestic biomass supply will slow down import substitution.
• Korea's industrial growth requires more energy, providing space for various renewable energy sources including biomass in the transition period.

Substitute Markets to Watch

While Korea reforms its biomass policy, Japan is projected to become the world's largest importer of wood pellets by 2030. This represents a strategic diversification direction for Indonesian exporters — although entry into the Japanese market requires higher quality standards and certification.

12. Conclusion

South Korea remains Indonesia's most important wood pellet export market in the short term, with South Korea accounting for a dominant share of Indonesia's total wood pellet export value. However, this market landscape is fundamentally changing.

The December 2024 REC reform is the clearest signal yet that Korea is moving to reduce its dependence on biomass imports. For Indonesian exporters, this doesn't mean the Korean market will close—but it will change: it will become more competitive, put more pressure on prices, demand more compliance, and be more selective in selecting suppliers who can prove the sustainability of their supply chains.

Exporters who will survive and thrive are those who invest in strong business foundations: legality (SVLK) and sustainability (FSC/SBP) certification, consistent quality, planned production capacity, and a vision for market diversification that is not dependent on a single destination country.

Indonesia has significant potential as a competitive biomass producer in Asia. The key to realizing this potential sustainably is building an industry that complies with regulations, is environmentally responsible, and adapts to changing target market policies.

References and Data Sources

• Korea Customs Service (2023) — Data impor wood pellet Korea
• MOTIE (Desember 2024) — "Plans to Improve the Biomass Fuel and Power Market Structures"
• Chambers and Partners (2025) — Renewable Energy 2025: South Korea
• Solutions for Our Climate (SFOC) / Auriga Nusantara / Forest Watch Indonesia — Biomass Export Data 2021–2023
• IEA Bioenergy Country Report: Korea (2024)
• ScienceDirect: "Exploring the import allocation of wood pellets" (2024)
• IndexBox: Indonesia Wood Pellets Market Report (2025)
• Argus Media: "Korea's REC changes may pare long-term biomass imports" (2025)
• REGlobal: "South Korea Reduces Subsidies for Biomass Energy" (2025)