Canadian Biomass Magazine

PFI Report: Pellet markets to be “Wild West” in coming decade

July 26, 2011
By Scott Jamieson

July 26, 2011 - Fram Renewable Fuels' president Harold Arnold told PFI delegates to hold onto their hats at today's session - fantastic growth coupled with swings in biomass flow will be the norm in the coming decade.

"The industry will see wild growth in the next 10 years," Arnold concluded. "We'll see a tripling of global demand, new capacity to try to keep pace, changes in the way business is done that we can't even imagine today, and dramatic changes in the flow of fibre around the globe. Bioenergy is the wild west."

Arnold told attendees that 2011 has been a decent year, with a solid start due to colder than average weather in the Baltic delaying biomass shipments from eastern Europe, followed by good spot sales and growing interest in long-term contracts among larger European utility clients. "In the language of the intelligence community: there's a lot of chatter out there."

Looking ahead, he sees growth in global demand from today's 15 million tonnes to 27.5 million tonnes in 2015 and 45 million tonnes by 2020. While current production is only at 50% of capacity, much of that unused capacity is at smaller plants serving localized markets. As a result, more larger, strategically located pellet plants will need to be built to meet that rising bulk demand from European and Asian power generators.

Asia, specifically Korea and Japan, will require massive imports to meet aggressive co-firing requirements. "Korea in particular shows the kind of sharp growth that can happen when a government decides to support renewable energy." He added that easily 5 to 6 million tonnes will need to be imported into Korea alone.

Still, despite this fantastic global growth and lower increases in supply, don't expect prices to soar. "This is a policy-driven market. The subsidies put a floor on prices, which we like, but will also create a ceiling as well. At a certain point, it will be better for utilities to pay the penalty for using coal or natural gas than pay higher pellet prices." Arnold also added that growing interest in sustainability and certification in the EU as a factor that may soon complicate life for producers lacking access to certified fibre. 

"Like I said, hold onto your hat. It's about to get wild."

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