European Energy Firms Look To U.S. As Biomass Source

SEATTLE -- Demand for woody biomass, in the form of wood chips, wood pellets and torrified pellets will increase substantially in Europe over the next ten years, according to the North American Wood Fiber Review, a publication from Wood Resources International that covers both the pulpwood and biomass markets in North America.

Exactly how much though, is unclear as the size of the increase depends on policies and subsidies implemented by governments in individual countries within the European Union. The cost of locally sourced biomass on the continent has gone up for many energy plants, resulting in increased interest in importation of wood chips and pellets from neighboring countries or from overseas.

Wood Resources International says the U.S. South is on the top of the list as a long-term biomass supply source for a number of energy companies. The consulting firm notes the region has a stable supply of pulpwood, a wellfunctioning infrastructure, and competitive wood fiber costs as compared to most other markets in the world. According to the Wood Resource Quarterly, only Chile and the Western U.S. had lower softwood pulpwood prices than the U.S. South during the first quarter of 2010.

Hardwood wood fiber prices were well below the global average hardwood price index (GHPI). One region in the U.S. South that has drawn much attention lately is the tri-state area of Southern Georgia, Southeast Alabama, and northern Florida, a wood fiber hotspot profiled in the latest issue of the North American Wood Fiber Review.

Within this area, a significant number of new wood-to-energy facilities have been announced with one major pellet plant already operating. Sited in Northern Florida, Green Circle Bioenergy began operations in early 2008 and is exporting the entire production to energy plants in Europe.

Two additional large-scale, export-oriented pellet plants are on the drawing boards. The German company RWE plant in southern Georgia is under construction with plans to commence production in the 3Q of 2011, and Magnolia Biopower has announced plans for its own pellet export plant to also be sited in Southern Georgia.

This expanding green energy sector is situated within a stronghold of the traditional southern pulp industry with seven pulpmills within this Southeastern sub-region. The high concentration of wood fiber consumers within a fairly limited area has pushed wood costs higher the past few years, says Wood Resources.

Pine stumpage prices have increased faster in this region than the average price across the South. In the 2Q/2010, prices were more than 50 percent higher than two years ago. Wood Resources says that with the expected increase in wood consumption by the energy sector in this sub-region, it is likely that pulpwood costs will continue to be higher in this sub-region than the average for the U.S. South.

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