Panamaxing It Out

As the consumption of wood pellets in European power stations matures, shipping efficiency is maximized by utilizing the largest vessels available.
By Tim Portz | September 16, 2015

On June 2, at the Westview Terminal in Prince Rupert, British Columbia, a Panamax-class vessel, the Popi S, was loaded with nearly 60,000 tons of wood pellets produced by Pinnacle Renewable Energy. Thirty-four days later, the pellets were successfully unloaded at the Port of Immingham’s Renewable Fuels Terminal, making it the first successful use of a Panamax-scale vessel to transport wood pellets. The shipment is important for a number of reasons, significant among them that shipments of this size will need to become commonplace to make the widespread use of wood pellets for power generation economically sustainable in the long term.

The advantages of using larger vessels to ship wood pellets are easy to understand. Larger vessels generally allow for the transport of goods, including wood pellets, at a lower unit cost than smaller vessels. Still, there are numerous factors at play that complicate what initially looks like a simple business decision.

The movement toward the use of wood pellets to make electric power—in particular the conversion of nearly half of Drax power station’s annual output to biomass input—has created a demand for industrial wood pellets felt around the world. Producers with access to large volumes of wood fiber in close proximity to ocean shipping lanes have and continue to come online to satisfy this growing demand.

Particular to Pinnacle
Pinnacle Renewable Energy, Canada’s largest manufacturer of wood pellets with six production plants in British Columbia, perceives this market opportunity as fundamental in its corporate mission to be “the world’s most reliable producer and lowest-risk supplier of bioenergy products.” The bulk of Pinnacle’s production enters the global market via the company’s Westview Terminal, a $42 million wood pellet receiving, storage and shipping facility in Prince Rupert. This facility connects Pinnacle’s robust production footprint with any port in the world. The challenge Pinnacle must overcome is that its Westview Terminal is over 11,000 nautical miles from the ports on England’s East Coast. For comparison, the Port of Chesapeake, a Virginia terminal utilized by U.S.-based competitor Enviva, is just 4,214 nautical miles from the Port of Immingham. While the Popi S spent 34 days navigating North America’s West Coast, through the Panama Canal and northeast across the Atlantic, ships leaving the Port of Chesapeake likely made the journey in less than two weeks. The advantage in freight costs for producers in the southeastern United States is clear. “The only way we can compete is on scale,” says Vaughan Bassett, vice president at Pinnacle.

Until the Popi S shoved off from the Westview Terminal, Pinnacle relied largely upon the Supramax class of vessels. Bassett reports that Supramax vessels typically leave Westview with around 50,000 tons of pellets. “What we’ve determined with the Popi S trial is that the maximum cargo size that we can put into the Panamax class of vessels is about 60,000 tons—10,000 tons or 20 percent more than we were doing in the past. That is significant and considerable,” he says. Bassett continues by noting that the travel time and the fuel usage is virtually the same between the Supramax vessels they traditionally use and what they experienced and learned in the Popi S trial. “The only major difference is the amount of cargo you can put into it,” he says.

Not That Simple
When considering all of the results of Pinnacle’s Panamax tests with the Popi S, the company’s interest in increasing the widespread use of Panamax vessels is straightforward. The urgency toward this class of vessel, however, has more to it than simply moving more product at once. “Supramaxes are chartering for more money than Panamaxes right now,” Bassett notes. He points out that the vessel class’s greater flexibility is one of the key drivers in the premium the vessels are currently getting in the marketplace. Bassett concludes, “For quite a long time now Panamaxes have been languishing. There is lots of availability and chartering rates are relatively low.”

Combined with their economic advantages and their widespread availability, it is easy to wonder why Pinnacle doesn’t simply switch completely over to the Panamax class, beginning with its very next shipment. The answer, Bassett points out, is connected to a current requirement for all vessels carrying wood pellets. “You are required to use CO2, or some sort of inert gas fire protection system, on board a vessel carrying wood pellets,” he says. “That’s why Supramaxes are used, because they usually have it, while Panamaxes do not.” A small number of Panamax-class vessels, including the Popi S, are outfitted with this piece of equipment, Bassett says, but in a vessel class that numbers around 900, he believes only 50 or so have it installed.

For now, anyone looking to ship large amounts of wood pellets must find a vessel with this system installed, and the owners of Supramax vessels—nearly all of which have the equipment—know it. Trade associations have taken notice, and the Wood Pellet Association of Canada has been aggressively working on this issue for some time now. “It boils down to a market thing,” says Gordon Murray, WPAC executive director. “When the pool of ships that have this fitting is so small, it gives them such a huge negotiating advantage, all for a safety feature that is completely unnecessary.” Of course, simply proclaiming safety features unnecessary is far from enough to convince the International Convention for the Safety at Sea to change regulations. “We had to put some money out to do the research at WPAC to prove that the off gasses were not flammable,” Murray says. 

Proof of Safety
In a document Murray provided to Pellet Mill Magazine, written by Staffan Melin, research director for WPAC, research efforts spearheaded by the WPAC are outlined that have informed the IMO’s Bulk Cargoes Code since 2004. In the document, Melin notes that while wood pellets are classified in the category Materials are Hazardous in Bulk, because they do emit carbon monoxide as they degrade in transit, the gases they produce while degrading are not flammable.

The document indicates that the vast majority of ocean-going cargoes require the vessels carrying them be “equipped with fixed-gas fire extinguishing systems or fire extinguishing systems giving equivalent protection.” There are, however, cargoes that have been exempt from this requirement, and the WPAC has been working to get wood pellets added to this list. Quite simply, the WPAC has had to produce scientific proof that wood pellets “would not emit flammable composite gas, would not self heat and would not have a burn rate above a certain level.”

Working in close collaboration with the Univeristy of British Columbia, the WPAC conducted research that supported this claim and presented their findings to the IMO in September 2013. The process to ratify IMO regulations moves slowly, and the research worked its way through technical reviews and working committees through 2014, eventually ratified by the Maritime Safety Committee  June 12. The exemption will go into effect on a voluntary basis Jan. 1, and one year later—after procedural votes with IMO members—will become mandatory.

Once fully ratified, all Panamax vessels will be able to move wood pellets in bulk, regardless of whether they are equipped with the extinguishing systems. ”It’s not just good for Canadian producers,” Gordon says. “It’s good for every pellet producer in the world.”

Optimized for Size
While wood pellets are and will likely continue to be shipped in smaller, handy-sized vessels capable of carrying around 25,000 tons of pellets, the desired trend for producers and the ports that receive them is for larger shipments. Assuming an annual consumption rate of 6 million metric tons of wood pellets per year at Drax, delivered entirely in those 25,000-ton capacity vessels 240 individual shipments would be required. For comparison, the same volume delivered entirely by Panamax-sized vessels carrying 60,000 tons requires just 100 individual shipments. Looking at it this way, it is easy to see how larger vessels can help alleviate potential bottlenecks at U.K.-based pellet receiving ports.

With an eye on their transit distance from European markets, Pinnacle has always envisioned and planned on a progression towards Panamax vessels.  Speaking about Pinnacle’s Westview Terminal in Prince Rupert, Bassett says, “We designed the thing for Panamax-sized vessels, but the first time we actually filled a Panamax was the Popi S trial.”

The topography of the port is enviable when it comes to berthing Panamax-sized vessels. Built into a formation that Bassett refers to as fjord-like, Westview reaches depths of 13 meters right off the berth, and just a few more meters out the depth is 23 or 24 meters. “I think it is the deepest natural harbor on the West Coast in America,” Bassett says.

This natural depth allows the port to easily receive Panamax vessels, but the port’s ability to load the vessel was unknown until the Popi S trial. The speed and ease at which these Panamax vessels, 30 meters longer than Supramax and built with seven holds instead of five, matters for a number of reasons. Owing to the rainy climate in British Columbia, the Westview Terminal must make the most of any day with dry conditions. “We can’t load in the rain,” Bassett says. “Wood pellets are rain sensitive. We need to have the ability to load fast in periods which are quite short. We can load at 2,000 tons an hour if required.”

The same requirement applies when unloading vessels at their port destinations in the U.K. The Popi S was unloaded at the Port of Immingham’s Renewable Fuels Terminal, operational since 2014. The terminal, with 100,000 tons of on-site storage capacity, can unload vessels at a rate of 2,500 tons per hour. The facility employs two custom-built continuous ship unloaders (CSUs) built expressly for the unloading of wood pellets from very large vessels including Panamaxes.

With a slightly different hull configuration than Supramaxes, the team at the Westview Terminal wasn’t sure what to expect from an ease-of-loading standpoint. Their experience was a pleasant surprise. “We were able to load the pellets much easier, from a geometric perspective, into the Panamax than we had been able to in the Supramax,” Bassett says.

At their current production output, Pinnacle will load between 12 and 18 vessels each year at the Westview Terminal, and, up until the Popi S, those vessels had all been Supramaxes or smaller. But with the successful trial of the Popi S paired with the research and the subsequent decision by the IMO to include wood pellets on the list of items exempt from the requirement for extinguishing systems, it seems likely that more Panamax-class vessels will be berthing at Westview.

Certainly this is positive for Pinnacle, but it will also be a welcome development for the owners of a vessel class that’s been struggling to find steady volumes of cargoes. Built to move massive amounts of iron ore and grain, the Panamaxes were also once kept busy moving coal. Some of the Panamaxes slowdown can be attributed to the fall off in coal exports since 2012, but now, it seems, the vessel class might be buoyed by coal’s renewable replacement. If every ton of Pinnacle’s annual production were moved via Panamaxes, their volumes would create roughly 20 load opportunities for the vessel class, hardly enough to completely revive the class. Bassett, however, sees the success of the Popi S as the beginning of a widespread transition to Panamaxes across the industry. “With our successful use of the Panamax class now, we’ve sort of opened up that vessel class to the pellet trade,” he says. “It means there will be less of them lying idle.”

Author: Tim Portz
Executive Editor, Pellet Mill Magazine
701-738-4969
tportz@bbiinternational.com