Japanese Demand A Boon For U.S. South Wood Pellet Manufacturers

Over the last decade, European utilities have learned that displacing coal with sustainable wood pellets is one of the most efficient means of meeting renewable energy and carbon emissions reduction targets, leading to significant demand growth in global wood pellet markets. Now, their counterparts in Asia are learning the same thing. To meet their growing […]

Over the last decade, European utilities have learned that displacing coal with sustainable wood pellets is one of the most efficient means of meeting renewable energy and carbon emissions reduction targets, leading to significant demand growth in global wood pellet markets. Now, their counterparts in Asia are learning the same thing.

To meet their growing demand, European utilities looked across the Atlantic to one of the world’s largest fiber baskets, the US South. They facilitated the development of large-scale wood pellet export mills in the region by offering secure long-term contracts, or vertically integrating into the region (as is the case with Georgia Biomass and Drax Biomass International). Without the US South, large scale coal-to-biomass conversions like the United Kingdom’s (UK) Drax power station would have been impossible. Over the last ten years, United States wood pellet exports have increased from less than 200,000 tonnes in 2008 to over 5 million tonnes in 2017, a response to this growing demand.

While US pellet exports have played a significant role in facilitating large-scale coal-to-biomass conversions and co-firing projects in Europe, growth in the European industrial pellet market is decelerating as fewer coal units remain to be converted to wood pellets. As a result, US wood pellet exports to Europe are starting to slow after growing at a rapid 63 percent compound annual growth rate (CAGR) from 2011 to 2014; pellet export growth has slowed to 6.4 percent CAGR from 2014-2017.

FutureMetrics expects to see some more growth in European industrial markets over the next few years, as new conversions come on line in the UK and co-firing resumes in the Netherlands. However, growth in that market will likely plateau within the next five years. The opportunity for further development in industrial wood pellet exports lies with Asia.

Like the European countries that facilitated the first round of wood pellet development, Japan and Korea have some key characteristics that make them attractive markets for wood pellets. The UK, Belgium, Denmark, and the Netherlands, along with Japan and Korea are densely populated countries with relatively few domestic resources. These countries are net importers of energy and have a significant historical reliance on coal. In addition, all of these countries have support schemes for renewable energy that promote the use of biomass power generation.

From Forest2Market: https://blog.forest2market.com/japanese-demand-could-usher-in-new-wave-of-development-for-us-south-pellet-manufacturers

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