Canadian pellet manufacturers have been the main source of pellets to Europe almost since the beginning of co-firing, but that might change. Our producers could soon be pushed out by bigger, newer plants in the southeastern United States, which are closer to the market and can grow trees quickly on intensively managed plantations. If John Keppler has his way, that’s exactly what would happen.
Keppler is CEO of Enviva, a southeastern U.S. pellet producer. Speaking at the recent North American Biomass Pellet Export Conference in New Orleans, Louisiana (covered on page 30), he indicated that the U.S. south is poised to become the supplier of pellets to Europe and Scandinavia. He suggested that western producers should return to supplying pulp and/or pulp chips to Asian markets and should send their pellets to new markets developing there. “We’ve seen a bunch of that trade going through the [Panama] Canal. That shouldn’t happen,” he stated. The Maritimes he viewed as potential competitors with the U.S. south to supply Europe.
Enviva is planning to supply Europe 1 million tonnes/year, and Florida-based Green Circle Bio Energy 500,000 tonnes/year, their respective CEOs stated at the conference. Plus, there’s additional export pellet production capacity in the U.S. southwest, and more planned. Then there’s Suzano in Brazil, which is planning to produce 3 million tonnes/year of pellets starting in 2014.
Predicted increases in European demand for pellets of up to triple the current consumption certainly provides room for production growth. Canada is still the top supplier of pellets to Europe, with about double the U.S. exports, but the United States is catching up. Canadian producers need to keep a close eye on these developments and take steps to remain competitive. Two major factors are transport and fibre costs.
Northeastern producers should be in an excellent position to supply Europe, with a shorter shipping distance than from more southerly regions, but they are hobbled by poor port infrastructure. Serious investment is needed in eastern deepwater port storage and handling terminals designed specifically for efficient pellet transfer. The expected commoditization of pellets, with an exchange to begin in late 2011, plus the move to introduce standardized pellet properties and specifications (through ISO/CEN certification) will present the opportunity for aggregating pellets, similar to grain handling. This would allow multiple small producers to combine standardized product, maximizing economies of scale for shipping. Such producers might consider joint investments in port infrastructure.
To minimize production costs, pellet producers must continue to source the lowest cost fibre from sawmill and logging residues. Supporting market development for those sectors will ensure a continuous and stable supply of low-cost residue.