Global Demand for Woodfiber for Biomass and Pulp

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1 Global Demand for Woodfiber for Biomass and Pulp Bob Flynn Director, International Timber, RISI JOPP Seminar, Tokyo, Japan June 13, 214

2 Agenda for Today This first presentation will focus on DEMAND for pulpwood around the world, both for pulp and for biomass. The second presentation will narrow the focus to SOUTHEAST Asia, and the potential for biomass fiber production and exports from that region.

3 Despite declines in per capita consumption of certain paper grades, total demand for wood pulp will continue to expand Table 1 Forecast of Wood Pulp Production by Region Million Tonnes Region (Avg) year change % change North America % Western Europe % Asia % Latin America % Eastern Europe/CIS % Oceania % Africa % Total % Source: RISI s World Pulp and Recovered Paper Forecast

4 Pulpwood is also used to produce wood panels like MDF and OSB, as well as pulp Global Wood Fiber Demand for Production of Pulp and Wood Panels Million Cubic Meters per Year 1,1 1, 9 By Species Hardwood Softwood 1,1 1, 9 By Product Oriented Strand Board Reconstituted Panels (1) Pulp Includes all wood fiber sources (growing stock and non-growing stock). (1) MDF, particleboard, hardboard and insulation board.

5 Most of the increase in pulpwood supply will be from chipping roundwood, not from sawmill residues Global Fiber Sourcing for the Production of Pulp and Reconstituted Panels Million Cubic Meters per Year Fiber Sourcing in Pulp Industry Residual Chips Roundwood Demand Roundwood Demand by Species Softwood Hardwood

6 Although forecasts can differ widely, almost all agree that global consumption of wood pellets will expand in the future Million Tonnes 7 Global Consumption of Wood Pellets Other China Japan/Korea N. America W. Europe Source: Poyry

7 European Market Potential for Industrial Wood Pellets --- less than original forecasts Whole EU is a potential market for co-firing wood pellets Continued narrowing of focus: UK primary market, also Denmark, Belgium, etc. New CfD restrictions by UK Treasury: Eggobrough is a no go UK = Drax + (maybe) a few smaller projects Carbon price crash: focus shifts to fewer countries with additional support Support for co-firing limited in UK focus on few large conversions: Drax, Eggborough, etc.

8 Million BDMT Pulp production in the US South is stagnant, but wood pellet production is increasing pulpwood consumption 12. Wood Biomass Demand in the US South 1. Energy Other Panels OSB Pulp

9 Million Tonnes North American Wood Pellet Production Forecast US - Industrial US - Conventional Canada

10 A number of pellet projects have been cancelled, but big projects in the US South and Eastern Canada are proceeding Thousand Tonnes USA and Canada: Overseas Wood Pellet Exports 9, USA 8, Canada 7, 6, 5, 4, 3, 2, 1,

11 North American Pellet Export Destinations, 213 Netherlands 3% Germany Korea 2% 3% Denmark 5% Japan 1% Other 1% Italy 7% Belgium 13% United Kingdom 65%

12 Thousand Tonnes In addition to the European industrial power sector, heating is an important market Italian and German heating markets continue to grow and will demand more wood pellets Stronger euro helps Green Circle made the first bulk shipment from the USA to Korea in 213 RPS in place ETS starting in US Pellet Exports to Italy, Germany, and Korea Korea Germany Italy 244, tonnes 5 14, tonnes

13 Thousand Tonnes The Asian market is also increasingly important for Canadian pellet producers Non-industrial European markets and emerging Asian markets made up nearly 25% of Canada s exports in 213 Japan volume dropped off a little bit absent specific incentives After years of skepticism about Korean buyers, Canadian mill begin to make significant shipments Italy second largest 5 destination after the UK Canadian Pellet Exports to Italy, Germany, Korea, and Japan Korea, South Japan Italy Germany

14 Thousand Green Tonnes Almost all imported biomass in Europe is in the form of pellets, not chips 35 European imports of biomass chips from Africa Ghana Liberia

15 Thousand Tonnes The Korean market for wood pellets is already 1 times the size of Japan s import market Japan and South Korea: Wood Pellet Imports, Jan-April Korea Japan months

16 Pellet producers have been very disappointed that greater demand has not meant rising prices Averaage Value (US$/Tonne) Volume in Thousand Tonnes 3 UK: Volume and Average Value of Wood Pellet Imports 4, 25 2 Volume (R) Average Value (L) 3,5 3, 2,5 15 2, 1 5 1,5 1, 5

17 The expanding Chinese demand will continue to push hardwood chip volumes higher, but rate of growth is slowing Million BDMT India Taiwan Korea Japan China Pacific Hardwood Chip Imports by Market

18 Softwood chip markets have stabilized, although it is possible some new projects could be developed in China Million BDMT 3. Pacific Softwood Chip Imports by Market 2.5 Japan China Korea

19 Thank you for your attention! This presentation is based in part on research done for JOPP. Please contact JOPP for permission to use this information. For RISI: Contact: Bob Flynn Website: 19