Introduction
Palm kernel shells (PKS) are the shell fractions left after the nut has been extracted from crushing operation in the palm oil mill. PKS can be used in industrial boilers, furnaces and foundries, brick kilns, residential and commercial heating, and light-weight aggregate for concrete as an alternative fuel for biomass-based which combined heat and power plants.
PKS have long been used as a solid fuel in palm oil mill steam boilers in Malaysia and Indonesia. The steam generated is used to power turbines that generate electricity. Most of palm oil mills in Malaysian and Indonesia are self-sufficient in terms of energy by making use of kernel shells and mesocarp fibers in cogeneration.
Nowadays, the demand for PKS has increased significantly in Europe and Asia Pacific due to the narrow price gap between coal and PKS. The cement industries and power plant producers are increasingly using PKS to replace coal. PKS contains large and small shell fractions that mixed with dust-like fractions and small fibres which can be easily handled in bulk directly from the product line to the end use.
Malaysian Palm Kernel Shell Export Market
In 2020, Malaysia exported almost 1 million MT of PKS to the world. The major market is Japan with the share of 99.6% which equal to 981,624 MT. The export value of PKS in 2020 was at RM365.36 million which contributed about 0.25% from the total export value of oil palm products. Malaysian PKS export recorded a tremendous increase at 17.74% CAGR for the past five years. The increase of the PKS export mainly contributed by the import of Japan.
Table 1: Malaysian PKS Export (by country)
| 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2,019 | 2,020 | |
|---|---|---|---|---|---|---|---|---|
| Japan | 62,514 | 124,169 | 183,848 | 431,154 | 478,422 | 544,011 | 890,699 | 981,624 |
| Taiwan | 26,356 | 11,091 | 4,824 | 3,045 | 600 | 43,508 | 12,568 | 3,512 |
| China | 5,801 | 3,866 | 2,488 | 805 | 101 | 637 | 209 | 96 |
| Others | 25,566 | 79,732 | 95,592 | 463 | 11,114 | 10,897 | 236 | 142 |
| Total | 120,237 | 218,858 | 286,752 | 435,466 | 490,238 | 599,053 | 903,712 | 985,374 |
Source: MPOB
Import of PKS in Japan has increased tremendously since 2012, after the biomass generated power become eligible for a feed-in-tariff program (FIT). Indonesia is the biggest PKS supplier for Japan. In 2020, value of PKS import from Indonesia was about USD209.45 million compared to Malaysia was about USD65.8 million. The imported PKS almost wholly being consumed by medium and large FIT-eligible biomass power plants in Japan. Industry experts in Japan projected the amount of PKS imports to reach 5 million MT by 2025 due to the increase in the number of Japanese biomass power plants.
Japan FIT Programme
The Ministry of Energy, Trade and Industry (METI) of Japan approved a system of feed-in tariffs (FIT) for renewable energy generation on June 18, 2012. The pushes for renewable energy production is aimed at cutting reliance on nuclear, oil and liquefied natural gas and consume energy generated by renewable energy sources such as solar, wind, hydro and biomass for Japan’s energy needs Following the Fukushima tragedy, Japan’s investment in renewable energy would aid the world’s third-largest economy in moving away from nuclear power.
Realising the importance of this initiative Japanese Government has to expedite the adaptation of their renewable energy usage. In their Fourth Strategic Plan, they set the renewable energy share target at 24% by 2030 and their current renewable energy share is at 18%. The situation has resulted in an increase in demand for palm products such as stearin and PKS in their energy sector, especially in their biomass plant, which opened in 2014. PKS are the major feedstock in Japan’s energy sector due to its abundant supply and competitive price.
Government Initiative
Japan will continue as an important market for Malaysian PKS in the future. The positive development in the Japanese renewable energy programme has opened a window of opportunity for Malaysian PKS exporters to increase their exports to the country. However, this window of opportunity will not be enjoyed by the exporters if they are not being managed carefully. Malaysian Government through their respective agencies should assist the exporters to ensure the success of Malaysian PKS in Japan, following are the areas in which they may need assistance:
- Tax Relieve and Government Grant – PKS market has become more sophisticated compared to the previous years. PKS exporters have to invest in R&D to improve the quality of their products. Government assistance such as Tax Relieve and Grant will allow them to have to improve further and gain a better reputation in the market. The assistance will also encourage the Malaysian suppliers/exporters to find reliable partners.
- Competitive Price – Indonesian PKS has slowly increased their market share in the Japanese market due to their competitive price. They are selling approximately USD10 cheaper than their counterpart from Malaysia. Malaysian PKS exporters have difficulties matching Indonesian prices because of the high price charged by their suppliers. Malaysian PKS price has increased from RM100 per tonne five years ago to the current price of RM300 per tonne, particularly during low production seasons. There is a possibility that the price will increase in the future. Hence, Government intervention such as impose a ceiling price on PKS will help the exporters remain competitive.
- Quality – The biggest obstacle faced by Malaysian PKS exporters is quality. Most of the PKS supplied from the mills are dirty and mixed with foreign material such as stone, sand and mud. Even though the PKS has gone through the cleaning process, they still need to go through the R&D process to ensure they have the right quality. The additional process means additional cost and higher selling price. Imposing a regulation on monitoring the quality of exported PKS could be one of the ways to overcome the problem.
PKS has a huge potential in the future. The renewable energy taken by some of the world government has allowed PKS to gain its popularity as a cheap and sustainable source of energy. Both government and industry members need to work hand in hand from now to ensure this goal can be met.
Prepared by Muhammad Kharibi & Rina Mariati
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