PFI Conference Report: Wood pellet outlook

Seth Walker of RISI, speaking at the annual Pellet Fuels Institute Conference in Mashantucket, Conn., told the audience that most of this growth will come from the growth of industrial export market.

Walker said that 1.2 million tonnes were exported from B.C. in 2011 and noted the industry is trying to figure out if it can utilize the beetle kill stands for production. Walker noted that many believe that it’s not cost-effective or sustainable in the long term and a lot will depend on demand from the Asian market.

Wood pellet exports from eastern Canada were 100,000 tonnes, according to WPAC, said Walker and they are expected to increase, especially to the European Union. Walker noted that the region has a fiber availability advantage, but not a price advantage.

When is comes to export costs, Walker said that B.C. has the advantage in terms of wood cost, but when is comes to ocean freight costs, the U.S. south pays significantly less.

He also noted that there is potential growth in the export market to Asia, specifically Japan and South Korea. The Japanese government is mandating an increase in the use of renewable energy and this could help increase the market for B.C. wood pellets. According to Walker, 5% of Japan’s coal capacity equals 6.5 million tonnes of wood pellets.

His predictions for the European export market were not so rosy and he said the continued weakened Euro will further tighten margins for the pellet trade.

Speaking about inventories, Walker noted the fact that according to their latest survey, inventory levels were 50% higher in June 2012 compared to June 2011. This was mostly due to a warm winter, but that it is something to monitor down the line if it persists.