PFI Report: Biomass growing, lumber to follow

July 25, 2011 – RISI bioenergy economist Seth Walker gave mixed news at
the Pellet Fuels Institute (PFI) Annual Conference. Biomass investment has
been surging in Canada, but the forecast U.S. housing recovery has been
pushed back two years.

Walker was addressing the 240 industry members attending this year's conference in Jacksonville, Florida. He noted that growth in biomass projects and investment has surged in both eastern and western Canada during the past quarter, while growth in the United States stalled during that same period.

The economist also said that consumption of biomass in Europe continues to grow at a healthy pace, being led by growth in the UK. "I was surprised to find that some 75% of the new demand for biomass coming out of Europe was based in the UK. They have some aggressive renewable energy targets, and we can expect to see significant growth in co-firing there in the coming five years."

News was less positive when it came to the stalled U.S. housing and lumber markets. With lumber production currently at just 50% of the 2005 peak, Walker believes that the sector has leveled off. That's comforting for biomass producers who have managed to survive on that reduced level of clean sawmill residuals.

However, the continuing grind in the U.S. housing market has led RISI to change its recovery timeline. Walker now expects the U.S. housing sector to hit the magical one million starts level in 2014, rather than RISI's original prediction of 2012. "The good news is that we expect a significant and strong recovery from that point, with 2005 levels being hit around 2015. For pellet producers who have managed to cope with the current greatly reduced supply of sawmill residuals, that means things only get better from here as far as supply goes."

Walker also shared news of the pellet industry survey he is developing in conjunction with PFI. It currently includes 27 pellet mills with an average capacity of 58,000 tons, an average operating rate of 68%, and average inventory levels of just over 5% of capacity. Both organizations continue to promote the monthly data mining project, with the goal of including the overwhelming majority of producers in the United States as well as Canada. Mills interested in participating can get in touch with Canadian Biomass for contact information.