Production competition heating up for pelletsFriday 30 Nov 2012
Rising demand for wood pellets is anticipated to intensify competition between regional producers, especially due to new entrants from low-cost regions outside North America, e.g., Brazil, Russia and the Ukraine. With the European Union predicted to remain the most important market, regions with a sustainable, low-cost fibre supply and short-distance shipping (i.e., low-cost) access to Europe should be in the best competitive positions and, therefore, are expected to see their output grow faster than that of other higher-cost production regions. The importance of being a low-cost producer in the face of rapidly expanding global wood pellet production capacity was discussed in our January 2012 issue. The article showed that, while global wood pellet consumption grew at a rate of about 42%–45% in three years (2008–2010), capacity rose even faster (~70%–75%) during the same three years. As a result, a number of high-cost wood pellet producers in Western Europe (e.g., Germany, Austria, Sweden) and the U.S. were forced to close plants and/or curtail production in 2011. At the same time, capacity expansion in the main lower-cost production regions continued to grow at a rate of 20%–30% per year. Between 2009 and 2010, global installed capacity recorded a 22% increase to more than 28 million tonnes. Data for 2011 indicate that this figure will surpass 30 million tonnes. Not surprisingly, the three regions with the fastest rate of pellet production capacity growth in 2010 were the U.S. South, Western Russia and Western Canada. Versus Western Europe (the main consuming region), these three regions have much lower raw material costs. The availability of traditional sawmill residues (sawdust, shavings, chips) for the wood pellet industry has tightened substantially in Europe and the U.S. South. Growing raw material competition with the pulp and paper/panelboard industries is driving up sawmill residual wood product prices. Difficulty sourcing feedstock at competitive prices is an important factor contributing to the low utilization rate of installed capacity (only 53% on average in the major producing countries). As a consequence, the need for a more stable and secure supply of feedstock is emerging and, therefore, interest in the supply of alternative feedstock such as roundwood and forest residues (although usually more expensive on an oven-dry-tonne basis) is growing. Source: International Wood Markets Group, www.woodmarkets.com | ||
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