New Report Highlights The Competition Between Energy Wood Buyers And Traditional Forest Industries

Biomass and pellet markets have been largely untouched by this years collapse in fossil energy prices, according to a new bimonthly market report published by Hawkins Wright, a firm of London-based consultants to the forest products industry

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New Report Highlights The Competition Between Energy Wood Buyers And Traditional Forest Industries

Biomass and pellet markets have been largely untouched by this years collapse in fossil energy prices, according to John Bingham of editor of Forest Energy Monitor, a new bimonthly market report published by Hawkins Wright, a firm of London-based consultants to the forest products industry.

Meeting government targets for renewable energy will require ever larger quantities of forest biomass to be mobilised worldwide. In time, this could potentially match the volume of wood currently used by traditional forest based industries. As a result, energy wood and wood pellets are becoming internationally traded commodities.

Over the past year, a combination of steadily growing demand for energy wood and a contraction in the supply of readily available sawmill and forest residues has underpinned biomass and wood pellet markets in Europe and North America.

In both regions, however, the arrival of spring has brought a slight easing of spot prices as suppliers seek to minimise the costs of carrying stock through the summer. Traders report that an industrial buyer with enough storage capacity to accept delivery of a large volume of pellets early this summer might expect to pay a spot price below 120/t cif northern Europe. On the other hand, anecdotal reports suggest longer-term contracts of a year or more have seen hardly any slippage, with prices still in the mid- 130s cif. Spot prices may well drop further as northern Europes scarce biomass storage capacity fills up during the next couple of months.

The tightness of feedstock supplies has supported prices of energy wood and has pushed up costs on both sides of the Atlantic, costs which pellet producers have tried at least partly to pass on to the consumer. Costs aside, the limited availability of residues has forced many users of energy wood to look elsewhere for their feedstock. To some extent they have been helped by a sharp fall in pulpwood demand over the past six months. In both North America and Europe, pulp production is currently running at a level about 15-20% lower year-on-year.

Panel producers usually big users of residues and low grade wood, including pulpwood and recovered wood have been hit even harder by the recession; OSB production in North America in Q1 was 40% lower year-on-year. Pulpwood is normally outside the reach of energy buyers, but with demand from traditional end-users falling, prices of pulpwood have dropped to levels barely higher than those of energy wood. Consequently, in Sweden for example, pulpwood is now being chipped for energy uses, either for heat and power or pellets. The same is true elsewhere, although in some areas the trend has been delayed by the need for investment in equipment to chip and process logs rather than residues. In many cases these investments are now under way, although inevitably they will push up costs.

The growth in energy wood demand is therefore changing the nature of pulpwood and chip markets, with important implications for the traditional forest industries. These are permanent changes that will not simply be reversed when pulp, paper and sawn timber demand recovers. Energy wood is creating a floor beneath the pulpwood market, and given the scale of our governments renewable energy targets and the need to mobilize more costly sources of energy wood it is a floor that is far more likely to rise than to fall in the future. This will eventually place upward pressure on pulpwood prices and increase the competition between energy and traditional pulpwood buyers.

About Hawkins Wright and Forest Energy Monitor

Hawkins Wright is an independent British consultancy providing a range of strategic, forecasting, market intelligence and business information services to the international forest products industries.

For more information visit: http://www.hawkinswright.com
Forest Energy Monitor is a report analysing the rapidly growing forest biomass and wood pellet markets. The report was launched in May 2009 and will be published six times a year. Each issue will address three main themes:

Developments in forest biomass and pellet markets detailed coverage of market prices for energy wood and pellets, as well as biomass cost/price drivers such as forest and sawmill activity, freight rates, currencies, fossil energy and carbon markets and competition from non-wood biomass.

The feedstock implications of new investments and technologies. The first issue, for example, includes an article examining the feedstock requirements of the many biomass power plants planned for the UK. Future issues will focus on subjects such as torrefaction; wood pellet capacity growth; the status of wood-based biofuel technologies; shipping and logistic infrastructure; plantation investments in Africa, Latin America and Asia; and biorefinery developments at pulp and paper mills, etc.

Bioenergy markets are heavily influenced by national and international policies and legislation. The report will follow the development of policies and changes in incentives and regulations that have an impact on biomass and pellet demand and supply.

Forest Energy Monitor aims to be an essential tool for forest owners, pellet producers and biomass suppliers, sawmills and wood panel producers, pulp and paper companies, energy companies and utilities, shipping companies and port operators; equipment suppliers, financial institutions, policy makers and academics.

Click here for a sample issue of Forest Energy Monitor

Contact: John Bingham
Tel: +44 20 8747 5840
Email: john.bingham@hawkinswright.com
Web: www.hawkinswright.com/forestenergy

Additional Information

Web Site: http://www.hawkinswright.com/forestenergy

Category: Forestry>Industry Press Releases

Region: UK

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