Indonesias Wood Pellet Exports To South Korea

Why Is South Korea a Major Export Market for Indonesian Wood Pellets?

South Korea is the largest and most important export destination for Indonesian wood pellet producers as a whole. 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 directly influenced by government policies through the Ministry of Trade, Industry, and Energy (MOTIE).

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

Market Overview: Latest Data and Trends

Korea's Wood Pellet Imports: Tremendous Growth

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

Source: IEA Bioenergy Country Report: Korea (2024); Korea Customs Service (2023)

Indonesia's Position in the Korean Market

Indonesia is not the largest supplier of Korean wood pellets by total volume — Vietnam and Russia dominate overall supply. However, Indonesia has been the fastest-growing source market in recent years. Indonesian wood pellet exports to South Korea experienced exponential growth: from around 50 metric tons in 2021, they jumped to over 68,000 metric tons in 2023.

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

Source: IndexBox — Indonesia Wood Pellets Market Report (2025)

Major Suppliers Competing 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 — holds a cost advantage in raw wood materials
• Malaysia — particularly for PKS (palm kernel shell) based pellets, which are now subject to increasingly strict regulations

Key South Korean Regulations That Exporters Must Understand

Nothing is more critical to wood pellet export opportunities in Korea than understanding its Renewable Portfolio Standard (RPS) and Renewable Energy Certificate (REC) system.

Renewable Portfolio Standard (RPS)

The RPS is a mandatory policy requiring operators of power plants with a capacity of 500 MW or more to supply a prescribed percentage of renewable energy annually. MOTIE has set steadily increasing RPS targets:

• 9% in 2022
• 10% in 2023–2024
• 20.5% target for 2025
• 25% target for 2030

This obligation is driving Korean electric utilities to purchase and burn wood pellets at scale.

Source: MOTIE (December 2024) — "Plans to Improve the Biomass Fuel and Power Market Structures"; Chambers and Partners — Renewable Energy 2025: South Korea

Renewable Energy Certificates (REC)

To meet RPS obligations, utilities acquire RECs — government-issued certificates per megawatt-hour of renewable electricity generated. REC weighting varies by energy type:

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

This REC weighting structure is what made wood pellet imports from Southeast Asia financially attractive to Korean utilities for many years. Foreign biomass carrying an REC weighting became more competitive than many other renewable energy sources.

Sustainability Regulation

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

This distinguishes Korea from the EU (which requires ENplus/FSC certification) and is one reason the Korean market is more accessible to Indonesian producers operating on a relatively straightforward certification basis.

REC Reform December 2024: Critical Impact for Indonesian Exporters

December 18, 2024 marked a pivotal moment in Indonesia–Korea wood pellet export dynamics. 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 expired in January 2025
• REC weights for three state-owned dedicated biomass power plants are being gradually reduced: from 1.5 → 1.0 (2025) → 0.75 (2026) → 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 over the next 15 years

For new generators:

• From 2025 onward, new biomass plants are no longer eligible for RECs

Immediate Implications for Indonesian Exporters

The impact operates in two directions and must be understood with nuance:

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

Medium-to-long term (2026 onward): 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, 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 must anticipate this shift with a well-considered market diversification strategy.

Source: Argus Media — "Korea's REC Changes May Pare Long-Term Biomass Imports" (2025); REGlobal — "South Korea Reduces Subsidies for Biomass Energy" (2025)

Wood Pellet Quality Requirements and Standards for the Korean Market

Technical Specifications Required 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 ENplus A1 standards, while Korea tends to accept industrial-grade wood pellets with sufficient calorific value for co-firing and dedicated combustion.

Most Competitive Raw Materials for Indonesian Wood Pellets

Raw materials from Indonesia 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 approximately 4,700 kcal/kg, well-suited for co-firing
• Wood industry waste — sawdust and wood chips from furniture and wood processing industries

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 hold an S-LK (Timber Legality Certificate) to obtain the V-Legal document required for customs export clearance. SVLK proves that the wood used in the product comes from legal sources and is traceable 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) or Airway Bill
• Certificate of Origin
• Phytosanitary Certificate — required because wood products have the potential to carry pests
• Quality analysis report from an accredited laboratory

Documents Required on the 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 the importer/buyer)

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

Export Process and Flow: Wood Pellets to South Korea

General Export Flow

1. Sales Contract with Korean Buyer
2. Production & Quality Control (per contract specifications)
3. Certification Processing (SVLK/V-Legal, Phytosanitary Certificate, Certificate of Origin)
4. Shipment (Bulk carrier or bagged containers)
5. Bill of Lading & Shipping Documents Issued
6. Payment (Letter of Credit / Telegraphic Transfer)
7. Customs Clearance in Korea (by the importer)
8. Arrival at Korean Port (Incheon, Busan, Pyeongtaek, etc.)

Shipping Mode

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

Major destination ports in Korea include Incheon, Pyeongtaek, Gunsan, and Yeosu — generally located near the power plants that consume 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 when the Korean buyer arranges shipping independently

Who Are the Buyers in Korea? Understanding Korean Buyer Behavior

Main Buyer Types

1. State-Owned Power Companies (SOEs)

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 subsidiaries of KEPCO (Korea Electric Power Corporation) 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 acting 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 for new exporters, but margins received by exporters are thinner.

Buyer Behavior: How Korea Differs from Japan

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

Compliance Challenges and Issues to Watch

Legality Issues and Problematic Export Practices

Indonesian wood pellet exports to Korea are not without serious controversy. An Indonesian and international civil society coalition has documented illegal, unreported, and unregulated (IUU) export practices within the wood pellet supply chain serving Korea and Japan.

Between October 2023 and August 2024, shipments involving several Indonesian provinces — including Central Java, East Java, and Gorontalo — totaling approximately 102 million kg valued at US$13.4 million were flagged for compliance violations. The most prominent case involved unauthorized transhipment in Gorontalo waters, where foreign vessels were loading and unloading outside permitted areas.

Source: Solutions for Our Climate (SFOC) / Auriga Nusantara / Forest Watch Indonesia — Biomass Export Data 2021–2023

Implications for compliant exporters: These IUU practices damage the reputation of the Indonesian wood pellet industry as a whole and make it more difficult for legitimately operating exporters to earn the trust of Korean buyers.

Reputational Pressure and Deforestation

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. Investigations suggest that a substantial share of biomass originating from forest areas cleared specifically for wood pellet production since 2021 has been shipped to Korea and Japan. This pressure contributed directly to Korea's REC reforms in December 2024.

For exporters seeking to build a long-term presence in the Korean market, sustainability certifications such as FSC (Forest Stewardship Council) or SBP (Sustainable Biomass Program) are no longer merely a value-add — they are becoming an entry point to a premium buyer segment that is increasingly resistant to reputational risk.

Price Volatility and Policy Risk

Wood pellet prices in the Korean market are heavily influenced by REC weights set by MOTIE. When 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 among Vietnamese suppliers — about a short-term demand surge followed by a sharp, sustained decline.

Indonesian exporters must plan production capacity carefully and avoid expanding massively based solely on spot demand that may be temporary in nature.

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 current. To target tier-1 buyers — large utilities — begin investing in FSC Chain of Custody and/or SBP certification. As reputational pressures intensify in Korea, this certification is becoming an increasingly important competitive differentiator.

2. Build Direct Relationships with Buyers

Do not 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 open to new suppliers who can demonstrate production capacity, consistent quality, and document compliance.

3. Guarantee Consistent Quality and Volume

Korean utilities purchase in large volumes and operate on tight delivery schedules. The ability to guarantee consistent specifications batch-to-batch and meet delivery timelines is a key competitive differentiator. Invest in a standardized quality control system and select a reliable shipping logistics partner.

4. Diversify: Do Not Depend 100% on Korea

Given the long-term downward trend in REC weighting, it is essential not to allocate all production capacity to the Korean market alone. Key markets for diversification include:

• Europe — requires ENplus certification but offers premium pricing
• Japan — requires higher quality standards but offers stable, long-term contract relationships
• Indonesia's domestic market — PLN's co-firing program represents a growing opportunity

5. Leverage Indonesia's Cost and Geographic Advantages

Indonesia holds genuine competitive advantages: lower raw material and labor costs compared to Europe or North America, and relatively short transit times to Korea (approximately 5–10 days from eastern Indonesian ports) compared to suppliers from Russia or Canada. These advantages should be reflected clearly in your pricing strategy.

Outlook: The Future of Indonesia–Korea Wood Pellet Exports

Short Term (2025–2026): Opportunity Amidst Transition

The REC reform taking effect in 2025 creates a short-term window of opportunity: Korean state-owned utilities are incentivized 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 REC weights for existing facilities are reduced. Korea's 21.6% renewable energy target by 2030 places new emphasis on solar and wind rather than imported biomass. Indonesian exporters should factor this decline into their medium-term business planning.

Factors That Could Maintain or Increase Korean Demand

• The Lee Jae-myung administration (from June 2025) is emphasizing accelerated renewable energy and "RE100 industrial complexes" — which may sustain some need for biomass during the energy transition
• Korea's limited domestic biomass supply will slow down import substitution in the near term
• Korea's industrial energy demand growth creates space for multiple renewable energy sources, including biomass, during the transition period

Alternative Markets to Watch

As Korea reforms its biomass policy, Japan is projected to become the world's largest importer of wood pellets by 2030 — representing a strategic diversification target for Indonesian exporters, albeit one requiring higher quality standards and certification investment.

Conclusion

South Korea remains Indonesia's most important wood pellet export market in the short term, commanding a dominant share of Indonesia's total wood pellet export value. However, this market landscape is fundamentally and permanently 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 does not mean the Korean market will close — but it will evolve: it will become more competitive, more price-pressured, more compliance-demanding, and more selective in choosing suppliers who can prove supply chain sustainability.

Exporters who will survive and thrive are those who invest in strong operational foundations: legality (SVLK) and sustainability (FSC/SBP) certification, consistent quality management, disciplined production capacity planning, and a genuine commitment to market diversification beyond a single destination country.

Indonesia holds significant potential as a competitive biomass producer in Asia. Realizing that potential sustainably requires building an industry that is legally compliant, environmentally responsible, and capable of adapting to the evolving policies of target markets.

This article provides a detailed guide on "Wood Pellet Exports" for everyone involved in the industry, particularly those looking to export to South Korea, which has become a significant market for Indonesian wood pellet producers. The guide offers insights into the South Korean market, including its unique characteristics and energy policy ecosystem, to help exporters navigate the complexities of "Wood Pellet Exports" to this country.

PT Haafa Wirama Lestari exports biomass products across several markets today and is actively evaluating South Korea as a diversification target, drawing on the operational and compliance experience built in our current export markets.

References and Data Sources

• Korea Customs Service (2023) — Wood Pellet Import Data
• MOTIE (December 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)