Thursday, April 24, 2014

Freight Forwarders and Shipping Lines Welcome Growth of US Biomass Exports

Wood Pellet Shipments Rise Inexorably as Search for Alternative Fuels Continues
Shipping News Feature

NORTH AMERICA – EUROPE – WORLDWIDE – One of the drivers of the logistics industry is the development of new techniques and technologies, as one market falls away another grows to replace it, and freight forwarders and shipping lines love to see bulk product sectors growing, particularly as the products often replace their predecessors, witness the increasing numbers of LNG tankers. One other such example is the rapid growth of biomass fuels and in particular the wood pellet industry, which demonstrates how a previously low value by-product can become a profitable industry mainstay.

Wood pellets are created from the compressed sawdust and waste products from prepared wood and are often created from timber which is unsuitable for other uses. The finished pellets can be used as both an industrial and residential fuel source for use in locations ranging from electricity producing power plants to home fires. As a fuel source they can be manufactured in very precise sizes to suit a variety of uses and combustion temperatures are reliable, predictable and efficient.

In the decade from 2006 worldwide production of wood pellets was predicted to quadruple and, judging by the figures just in from North America, this may in fact prove a conservative estimate. A glance at page 13 of a report from International Energy Agency Task 40 in 2007 showed the US to be the second biggest producer of pellets (behind Sweden) but the largest exporter globally by a very long way. Now the latest report by the North American Wood Fiber Review (an industry publication from timber consultancy company WRI) which details wood production and prices and which has tracked and published on the subject for over twenty years, reveals how the industry is burgeoning, both domestically and internationally.

The review states that North America exported wood pellets valued at over $650 million in 2013, a dramatic increase of more than 250% in just two years to reach 4.7 million tonnes. The US South shipped almost three million tons last year, which was almost two-thirds of total export volume from North America and the boom has led to wood pellet exporting companies building more new facilities to manufacture pellets, principally for the European market (which these days has its own biomass exchange, APX-ENDEX) and which according to a WRI survey, has seen production grow from 0.8 million tonnes in 2011 to 2.9 million tonnes in 2013.

States such as Georgia, North Carolina and Virginia lead the charge to develop the industry but Canada, although showing a less dramatic jump, has produced an increase of 50% since 2011 and the Canadians have now opened a new market with the first regular shipment to South Korea starting last year, and seen a simultaneous rise in volume exported from Nova Scotia and New Brunswick, whilst a new pellet export facility under construction at the Port of Quebec is the first dedicated infrastructure for pellet exports along the St. Lawrence Seaway.

The North American Wood Fiber Review says the presence of this new facility, when completed, reduces a substantial entry barrier for a number of smaller pellet companies which are interested in the international market saying in the fourth quarter of 2013 export volumes from the Eastern provinces accounted for 25% of Canada’s total pellet exports, a share that is likely to increase in 2014 and 2015.

The fact that many of these pellets come from smaller producers can be a problem for the industries which are often end users. Pellets are shipped either as bulk freight or in containers but quality, size etc. can vary from individual exporters whilst industrial users demand continuity of supply and consistency of product. The introduction of a European standard, EN 14961-2, in 2010 goes some way to alleviate this second problem in one market but as time moves on there are bound to be more moves by the big international users to secure supplies by investing in their own production facilities, financing pellet plants and even purchasing forestry concerns.

It seems likely that, assuming fossil fuel prices continue to rise, pellet fuels will match and possibly exceed other biomass solutions, particularly in regions where alternative power sources such as solar or wind, prove ineffective for geographical reasons. The current growing concerns over the continuity of natural gas supplies will surely at least secure a foundation for the countries which are able to produce a reliable supply of export products such as wood pellets for some time to come.

Photo: Tennessee wood pellet plant courtesy of Astec Inc.