Forest Biomass – Fool's Gold or 14 Karat?

Attitudes toward the emerging biomass industry run the gamut. Some timberland owners see an emerging biomass industry as a chance to attract new customers, create a market for logging waste, generate new markets for pulpwood-grade timber and justify more aggressive forestland management. This group is aggressively forging relationships with prospective new stakeholders, hiring and training staff, rethinking harvesting and procurement systems and entering long-term agreements with prospective customers.

Not all timberland owners and harvesters share the same enthusiasm. Many are taking a more hands-off approach, satisfied to be the second to the table. This “believe it when I see it” approach follows on the heels of the perception that policy is driving interest in the bioenergy industry despite unstable economics and unproven technology.

In our assessment, the emerging bioenergy markets will have a significant influence on wood prices and procurement. Over the past three years, there has been strong interest in developing new energy supplies. Forest biomass is experiencing unprecedented investment in developing this energy source, particularly in the U.S. South. The recent start up of new forest biomass energy capacity is having a significant effect on wood prices in some states. Looking forward, an expanding biomass market will complicate the landscape for traditional forest product industries and timberland owners, as new demands are placed on a shared resource.

F2M’s forecast of elevated energy prices, US and international government sponsorship of “ clean energy” projects, continued focus on carbon emissions and the ability to monetize those emissions will keep current biomass-to-energy and biomass-to-liquid fuels projects viable.

To the traditional pulp and paper manufacturers, the government subsidies cause much consternation. The subsidies, through outright grants and/or tax incentives, clearly disadvantage the pulp manufacturers. I certainly see the manufacturers point. The current environment is anything but fair. However, it seems that few government entities believe that the existing industry is more important than the need to wean us off foreign oil or provide a “low cost” energy alternative. The pulp and paper manufacturers are going to simply have to learn to adjust to these new realities.

In F2M’s recently released US South: Biomass Study we delve into the bioenergy market drivers, the demand the drivers are creating and the supply base from which it will tap. There are a few large takeaways:

• The new energy market is already affecting delivered prices for pulpwood, chips and wood fuel.
• The new energy markets will develop at an understandable and metered pace.
• The technological advancements needed to tap “underutilized” forest biomass stocks will be slow to develop.
• Over time, the new energy markets will drive up fiber costs for pulp and paper manufacturers, causing capacity reductions in the US South.
• The pace of development and resource requirements will be much steeper and more disruptive than that of OSB over the past 15 years.

If you are interested in this topic, I recommend that you call either Suzanne Hearn (704-357-0110 x 17) or me (704-357-0110 x 11) or visit our website at www.forest2market.com/f2m-biomass to learn more.

As always, thanks for your business and commitment to Forest2Market.