Issue link: http://palletcentral.uberflip.com/i/536121
34 PalletCentral • July-August 2015 palletcentral.com production capacity of 3.5 MMT. Three additional Canadian plants are under construction, which will add almost 1.0 MMT of capacity, and another 11 have been proposed, which could raise Canadian capacity to 5.6 MMT. In the U.S., the vast majority of new and proposed construction is in the South. The average production capacity of U.S. plants now in operation is around 70,000 metric tons of pellets, the average capacity of new and proposed southern plants is around 410,000 metric tons. Most have, or expect to have, large contracts with European buyers for the vast majority of production. Impacts and Markets U.S. Forests: With little historical data available, it is difficult to forecast the future impacts of surging production to forests. In some areas, pellet plants may simply fill vacuums left by closures of paper, plywood and OSB factories that local forests had supported. In areas where traditional forest products factories are still operating, pellet plants could put unprecedented demands on local forests. However, the added demands—and the higher timber prices they would likely bring—could pull more timber into the market, and even drive an expansion in forest area. A recent U.S. Forest Service report found that increased wood pellet demand could "provide new markets for U.S. timber exports, increase wood prices, and lead to increases in forestland area." Researchers used computer modeling to project future demand and pricing based on two scenarios, one assuming that current harvest levels continue into the future, and another assuming increasing demand from pellet mills and other bioenergy producers. While the first scenario projected net forestland decreases across the South by 2040, the second showed an increase in forestland despite higher harvests. Forest Service Research Economist and lead author Karen Abt explained: "We know people plant more when prices go up. We also know that they keep more natural forest as forest when prices go up." Industry: Competition for raw material will intensify as more pellet plants are built. Manufacturers that use the lowest quality logs and residuals will feel the biggest impacts. However, higher overall prices for timber and logs will effect primary and secondary wood products manufacturers of all kinds, including those in the hardwood industry. On a positive note, loggers should have more incentive to continue operating, and perhaps more people will enter the profession. Uncer tainties Abound Myriad questions remain about future wood pellet demand and the impacts of expanding pellet production. How many of the proposed plants will the industry actually build? How will raw material prices for pellet plants be impacted by price swings for other forest products? We will address these and other questions as global wood pellet markets continue to evolve. PC Based in Charlotte, North Carolina, Andy Johnson is regional editor of the Hardwood Publishing Company. He can be reached at andy@hardwoodreview.com or phone 704-543-4408. MARKETS Global wood pellet production, 2004-2014 (Hawkins Wright).