Cautious Optimism

Markets that gave rise to the pellet industry will begin to plateau, but the promise and growth of new market opportunities are very real.
By Tim Portz | November 01, 2014

The market shows “more certainty now than there was 12 months ago.” With this message, Seth Ginther, USIPA executive director, welcomed the 475 attendees to the U.S. Industrial Pellet Association’s annual fall gathering, held  Oct. 1 at Miami’s historic Fontainebleau resort. While British utilities have been the market that has thus far propelled Ginther’s members, conference panelists suggested that growth in the sector will have to begin coming from other places.

“The coal-to-biomass conversions that you already know about are likely to be it,” said keynote speaker Nigel Adams, a member of parliament from the power station-rich Selby area of North Yorkshire, England.Adams and other panelists pointed to waning appetites of British policymakers to offer more financial support for biomass conversions of existing coal power stations. Noting that biomass solutions are funded with the same dollars that fund other renewable technologies, Adams said, “It is a tragedy that so much of the U.K.’s support for renewables has been spent on technologies that are more expensive and far less reliable than biomass.”

While the news about the inevitable plateau of the market that gave rise to the industrial pellet industry gave the conference’s opening a cautionary tone, attendees were soon buoyed by reports of long-expected markets finally coming to life.  “You might see some folks in this room that look a little tired, as many of them spent some time in South Korea last week,” said Ginther.

RISI’s Seth Walker offered the conference’s most detailed assessment of the emergence of the long-anticipated South Korean pellet market, reporting that in the second quarter of this year, South Korea imported nearly 400,000 metric tons. In the same quarter of 2013, South Korean pellet imports topped just over 60,000 metric tons. For now, Vietnam enjoys the largest South Korean market share, followed by Canada and China. This market is fueled by a 2012-initiated renewable portfolio standard that requires 2 percent of all power generated by South Korean utilities to be renewable. An ultimate goal of 10 percent remains in place, but the achievement deadline has been pushed back to 2027.

The South Korean market remains a challenging one for North American producers, however. The country has little inbound pellet infrastructure at ports, and delivery costs are the responsibility of producers. “The South Koreans are ruthless on price,” said FutureMetrics president William Strauss.
The conference closed with a producer panel, and the conversation quickly turned toward the ongoing public debate about the overall sustainability of the sector and biomass-derived power generation.Ginther and his member panel reported that while biomass generation has achieved broad public support in the U.K., a very vocal and active minority remains in place and committed to disseminating misinformation.  Panelists expressed frustration about a general lack of understanding about how the pellet industry fits inside of a robust, well-established and sustainable North American forest products industry. Westervelt’s Mike Williams brought the panel and event to a conclusion by wondering aloud, “I just don’t understand how people would think we would destroy the resource that we rely on for our business.”

Author: Tim Portz
Executive Editor, Biomass Magazine