Final Thoughts Green Growth The global wood pellet market outlook looks bright for Canadian producers. By Gerry Van Leeuwen lobal markets for wood pellets are projected to grow by 200 to 300% from 2012 to 2020 – from 16 million tonnes to 40-50 million tonnes. Forecasts indicate that Europe will re-main the major market for wood pellets – at about 25-30 million tonnes in 2020 compared to 12 million tonnes in 2010. An important market change expected during the next eight years is the huge consump-tion growth forecast for the Asian market – from less than one million tonnes in 2010 to about 15 million tonnes in 2020. As global wood pellet production in-creases, it is becoming clear that low-cost pellet production regions are becoming the major pellet exporters. The question of which low-cost production regions will evolve to supply the growing markets will depend to a great extent on the global com-petitiveness of the two major cost compo-nents of every pellet manufacturing plant: delivered raw material cost and transporta-tion costs to market. EUROPEAN MARkET dEVELOPMENT G up in the U.S. South to fill growing Euro-pean industrial demand from a relatively cheap and abundant wood supply source combined with the advantage of low ship-ping costs. Growing wood pellet production ca-pacity in the U.S. South made the U.S. the largest wood pellet exporting country in the world in 2012, when U.S. exports exceeded Canadian exports for the first time. U.S. export volumes are forecast to nearly qua-druple by 2015. CANAdIAN MARkET dEVELOPMENT fired power generators to begin producing a minimum of 2% renewable energy by 2012, increasing by 0.5%/year until 2020, at which time they will be required to pro-duce a minimum of 10% renewable energy. It is expected that at least 60% of renewable energy will come from wood biomass, leav-ing about 40% for other sources. JAPAN MARkET dEVELOPMENT Growth of the European Union wood pellet market is the result of a number of govern-ment mandated energy targets, such as the EU’s “clean energy” policy adopted in 2005 that set a 20% reduction in greenhouse gas (GHG) emissions and a minimum of 20% renewable energy consumption by 2020. U.K. targets for 15% of total energy con-sumption to be produced from renewable energy forms by 2020 and a mandate that 35% of electricity supply must be renew-able, have also helped spur exports. U.S. MARkET dEVELOPMENT In Canada, 65% of the country’s pellet pro-duction capacity is located in Western Can-ada (mainly British Columbia) and 35% is located in Eastern Canada (mainly Que-bec and New Brunswick). The B.C. mills are mainly focused on overseas exports (about 85% of shipments). Eastern Cana-dian pellet mills mainly sell their produc-tion in bags in Eastern Canadian and U.S. Northeast wholesale/distributor markets. Just three of 21 plants in Eastern Canada exported pellets overseas in 2010. In 2011, Canadian offshore exports equaled about 60% of total pellet produc-tion. Offshore exports from both Western and Eastern Canada are forecast to contin-ue to grow, though not at the explosive rate being witnessed in the U.S. South. SOUTH kOREA MARkET dEVELOPMENT Since the Fukushima nuclear accident in 2011, the Japanese government has been reviewing the country’s energy and re-source development policies. The policy direction that the government is indicating it will follow during the next 10 to 20 years includes obligating utilities to use renew-able energy; increasing non-fossil fuel en-ergy utilization to 50% and increasing the zero GHG emission power supply from 34 to 70% by 2030. CHINA MARkET dEVELOPMENT Until five or six years ago, U.S. pellet de-mand was limited to residential and insti-tutional heating markets in mainly the U.S. North East. In the last few years, a rapidly expanding wood pellet industry has sprung Although South Korea is a small country, it is the world’s 10th largest energy consumer, fifth largest oil importer, and second largest coal importer. It currently produces about 65% of its electricity from fossil fuels. South Korea has become serious about reducing greenhouse gas emissions and has commit-ted to a 30% reduction in CO2 emissions from 2010 levels by 2020. In addition, the Korean government has introduced renew-able portfolio standards that require coal-Although very few specific renewable en-ergy policies have been announced by the Chinese government so far, China’s 12th five-year p lan allocates 4.75 billion RMB (US$750 million) in direct subsidies, in-centives and tax exemptions to build 200 green energy demonstration projects by 2015. In addition, China has set a biomass energy production goal equivalent to 50 million tonnes of coal by 2012. Although the five-year plan does not indicate specific types of green energy proj-ects to be undertaken, it is assumed that China will move to include significant vol-umes of wood pellets in the production of biomass energy to replace coal. China has set the development of sophisticated, next-generation biomass energy plants as the key part of its renewable energy plan.• Gerry Van Leeuwen is vice-president at International Wood Markets Group. MarCh/april 2013 34 Canadian BIOMASS
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