Low prices mute North American biomass markets
April 4, 2012
By Argus Media
Apr. 4, 2012, New York, NY - Bearish prices for industrial wood pellets in Europe are quieting the North American export market. Current prices are too low to foster any deals and many participants are away from their desks for the Easter holidays.
Apr. 4, 2012, New York, NY – Bearish prices for industrial wood pellets in Europe are quieting the North American export market. Current spot prices are too low to foster any deals and many participants across the supply chain are away from their desks in advance of Easter holidays.
Heavy stockpiling — after a fire at German utility RWE's Tilbury biomass plant in February — has flooded the market and pressured prices in all northwest European markets below $175/t delivered, a major ship broker said. Price recovery is not anticipated until after summer in some cases.
North American mills with spot tonnage will have to sell cargoes at distressed levels in the low $140/t fob US or $130/t fob western Canada in order to compete in that range. Some producers anticipate pending financial troubles as export margins continue to deteriorate.
“I would really expect several producers to actually go out of business because of this,” one major North American producer said.
Larger mills with high-volume contracts have yet to run into delivery problems. Regular shipments from British Columbia are finding homes in the UK, the Netherlands and Belgium, and producers report that volume activity is still consistent with throughput levels in the weeks leading up to the Tilbury fire.
A cargo from a single producer was loaded on the Star Juventas this week. The vessel's deadweight is about 45,000t.
Bright spots are limited under current market conditions, but the UK still holds significant potential. If pending government incentives are approved, it could pave the way for the next wave of demand, one producer said. For British Columbian producers, Asia-Pacific demand is still elusive, but interest is increasing.
There is also increasing interest from North American developers looking to supply Europe with wood chips. Suppliers are drawn to the low processing cost, but must overcome EU import sanctions through phytosanitation. Very few ports have the infrastructure for the process and the effectiveness of installed systems can come under question. Pending supply is building along the US Gulf and east coast, but few firm deals have been contracted.
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