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2020 Analysis Of The US Wood Pellet Market

Date: 07/10/2020 08:33:51 From: wood-pellet-plant.com Clicks:

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Wood pellet is a solid fuel that is produced by crushing and densifying waste timber like sawdust, forestry residues, industrial byproducts like old paper and forestry wastes. The length is 1-2 cm and the diameter is generally 6, 8, 10, or 12mm. It is possible to produce 25mm wood pellet at maximum. In Sweden, 6mm wood pellet is encouraged to use in house as it can realize the best condition of combustion. Wood pellet production doesn't need to add binder as lignin, an element of wood, plays a role of binder and helps to pelletize when it is melted by heat.

Pellet fuel is a kind of renewables which has multiple applications. It can be used as a fuel for the boilers to heat houses and business buildings, and also, in some European countries, such as the UK, Belgium and Netherlands, pellets are used to generate utility-scale electricity. The market is always generated by the demands, as the demand for wood pellets is increasing, the global pellets market is developing fast, also the numbers of pellet plants in USA is growing rapidly, too.

Using wood and wood waste

Industry accounts for the majority of wood and wood-waste fuel consumption in the United States. The largest industrial users are wood products and paper manufacturers. They use lumber mill and paper mill waste to produce steam and electricity, which saves money because it reduces the amount of other fuels and electricity they purchase to operate their facilities.

The residential sector is the second-largest user of wood for energy in United States. Wood is used in homes throughout the United States for heating as cord wood in fireplaces and wood-burning appliances, and as pellets in pellet stoves. In 2018, wood energy accounted for about 2% of total residential energy consumption. In 2015, about 12.5 million, or 11% of all U.S households, used wood as an energy source, mostly for space heating, and 3.5 million of those households, mainly in rural areas, used wood as the main heating fuel.

In the electric power sector, there are several power plants that burn mostly wood to generate electricity, and some coal-burning power plants burn wood chips with coal to reduce sulfur dioxide emissions. Most of the commercial sector's use of wood is for heating.

The amounts—in trillion British thermal units (TBtu)—of wood and wood waste energy consumption by consuming sectors and their percent shares of total U.S. wood and wood waste energy consumption in 2018 were: 

industrial residential electric power commercial
1,540 TBtu 517 TBtu
 
215 TBtu 84 TBtu
65% 22% 9% 4%

US Wood Pellet Market

North America (USA and Canada) is the biggest producer for wood pellets, and produced about 11.6 billion MT (more than 48% of the global total) of wood pellets in 2016. Europe is the other key producer of the wood pellets market with the share of about 33%. USA, Canada, Germany, Russia, Latvia, and China, etc. are other key country producers of the product, the five took up more than 70% of the market.

Europe and North America are the two largest consumption markets of wood pellets in the world in the past few years and it will keep the same position in the next years. Sales volume of the Europe took up about 58% the global market in 2016 while North America took up about 20%. And North America is the largest exporter of Wood pellets in the world at present. China is the third largest market in the report with a consumption share of about 8% in 2016. Other key markets are Korea, Japan, etc. which have the large potential demand.

Consumption

The main drivers for wood pellet consumption in the U.S. have been regional price competitiveness with residential heating oil and propane as well as replacements of fuelwood burners with respect to comfort and automatic feed-in. There are some incentives for bioheat targeted at the residential and commercial building sector. Industrial use of wood pellets in heat and power is not incentivized. In fact, industrial consumption of wood pellets for heat and power production is marginal at best. The main use of woody biomass is limited to direct by-product (residue) use in the forest products sector, e.g., pulp and paper. Renewable Portfolio Standards (RPS) mandates the production of renewable electricity, including biopower, but wood pellets are usually not used in biopower facilities due to price. The Clean Power Plan could increase domestic wood pellet consumption in the electricity sector, but its implementation is uncertain and its market impact unknown and potentially limited.

Production

The U.S. wood pellet production started in the Northwest and Northeast, where small-scale production based on sawmill residues supplied regional residential heating markets. These markets grew but were ultimately limited by the expansion of the natural gas network and a limited price competitiveness of wood pellets. The U.S. production grew exponentially over the past years due to demand from oversea markets. The expansion took place almost exclusively in the Southeast (with some production increases along the East Coast) due to strategic factors including proximity to EU markets, traditional wood basket including availability of biomass resources, labor, infrastructure, and know-how.

Wood pellet market development in USA from 2008 to 2016

Figure 1 - Wood pellet market development in USA from 2008 to 2016 (2016* estimated)

As shown in Figure 2, pellet mills typically use residual chip fiber and pulpwood; the same feedstock as panelboard, OSB or pulp and paper mills.

Actual and announced feedstock source for use in pellet production in the U.S. South for 2005–2016

Figure 2 - Actual and announced feedstock source for use in pellet production in the U.S. South for 2005–2016 (Forisk Consulting in Abt et al., 2014).

Wood pellet consumption

No official statistics on domestic wood pellet consumption exists. However, it can be approximated via the following formula: Ci = Pi + Ii - Ei

Where Ci: Consumption in year i

Pi: Production in year (Sources: Lamers et al. 2012, FAOSTAT 2016)

Ii: Imports in year i (Sources: Statistics-Canada 2016, USDA 2016)

Ei: Exports in year i (Sources: EUROSTAT 2015, USDA 2016)

Table 1 - Estimated domestic consumption based on production, import and export statistics (metric tonnes).

Estimated domestic consumption based on production, import and export statistics
Estimated domestic consumption based on production, import and export statistics

Main consumers

The main consumers of U.S. produced wood pellets are export markets, accounting for 63 % in 2015. The remaining share is consumed domestically in residential heating. It is estimated that over 13 million wood heaters are in operational use across the U.S., the minority (roughly 10 %) of which is wood pellet stoves (Figure 3). Commercial use is limited and expected at less than 1 % total consumption (Table 2).

U.S. biopower and/or -heat facilities are not known to use wood pellets in significant quantities. Rather, these installations are regionally integrated and make use of local wood waste fractions. A key reason is that – apart from state Renewable Portfolio Standards setting mandatory renewable electricity production levels for power companies – there are no U.S. incentive schemes which could close the gap between the oversea and domestic market willingness-to-pay (WTP). Hence, U.S. biopower and CHP installations are usually in the vicinity of wood processing industries or urban agglomerations where they can make use of construction and demolition wood.

Figure 3- U.S. pellet stove sales and inventory (Source: Hearth, Patio, and Barbeque Association; RISI; own calculations).
Table 4-8 - Wood and wood-derived fuel consumption by sector as projected in EIA 2016 (PJ).

Table 2 - Wood and wood-derived fuel consumption by sector as projected in EIA 2016 (PJ).

 

Price trends

Historically, industrial wood pellets sold for $155 to $175 per tonne at Amsterdam, Rotterdam, or Antwerp (ARA) harbors (CIF-price: Cost, Insurance and Freight). U.S. FOB (Free-On-Board) or FAS (Free-Alongside-Ship) export prices have ranged between $140 and $155 per tonne in main distribution harbors along the Southeast (e.g., Savanna, GA, and Mobile, AL).

Residential markets are supplied by bagged pellets, stacked on pallets for bulk distribution. Prices vary, but are typically in the range of $5 (standard) to $7 (premium) per 40 pound bag (18.14 kg), equaling $275 to $385 per tonne (excl. tax) at a final user distribution center, e.g., supermarket.

Figure 4.17 - Average wood pellet prices in USA from 2008 to 2015.
Figure 4 - Average wood pellet prices in USA from 2008 to 2015.

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