North American wood pellet markets flat

Aug. 19, 2010, Washington, D.C. – North American wood
pellet markets were mostly flat in the week ended August 18, 2010, with both
export and domestic prices pressured by light interest from European and U.S.
generators for prompt deliveries. The U.S. dollar was nearly unchanged against
the euro in the past week, keeping export pellet prices fob U.S. east coast
terminals largely flat. In addition, many market participants were away from
their desks amid a summer lull that slowed transactional activity.

Spot interest was thin for deliveries to U.S.
utilities despite one market source saying that a shipment of industrialized
wood pellets was recently making its way to Chicago, Illinois. Consumption of
wood pellets by U.S. utilities is meagre compared with other generation fuels,
and some states that are using biomass to meet renewable energy portfolio
standards are relying more on other sources, including wind energy, to meet
those targets. Newly released data from the Energy Information Administration
showed net U.S. biomass generation was up 5.1% on the year in May, but still
only represented 1.4% of total nationwide generation in the month.

However, new U.S. biomass-fired power projects are
cropping up, underpinning the demand and price outlook and signalling more
competition for importers in Europe. Ohio regulators last week certified two
units at First Energy's R.E. Burger power plant as renewable energy facilities,
paving the way for the units to be retrofitted to co-fire biomass with coal or
fuel oil.

The “wood pellets/briquettes and/or agricultural
biomass in pellets, briquettes, or bales” to be used at the facility must meet
Ohio's definition of a renewable energy resource, and the energy generated by
the plant will be delivered to Ohio consumers, the state public utilities
commission said in a decision issued on August 11, 2010.

Despite the push to grow U.S. biomass-fired capacity,
Europe remains the key market for U.S. wood pellet producers; prices for prompt
deliveries there have slipped recently on ample nearby supply. Longer term,
biomass generation in the UK and other European markets is expected to grow in
the coming years, which is likely to support forward pellet pricing.

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