Three Reasons Maine is the Northeast’s Best Bet for Industrial Pellet Investments

I recently returned to Charlotte from the Northeast Biomass Conference in Pittsburgh, where I delivered a presentation on the Northeast’s potential as a supplier of industrial pellets to Europe. As usual, I probably told the audience some things they didn’t want to hear. Unless they were from Maine, that is.

In my presentation, I concluded that Maine is the only state in the Northeast that has the right conditions to interest investors and developers of wood pellet manufacturing facilities for export to the EU.

What are the conditions that led me to this conclusion? I isolated three.

1) Having easy access to a deepwater port is the most important condition that a pellet mill must meet in order for it to be successful. To make the pellet trade cost efficient, mills must be located in close proximity to a port with a minimum of a 36’draft, bulk handling capabilities and—ideally—a history of wood exports. Maine has two ports that meet these criteria: Searspoint (40’ draft) and Eastpoint (42’ draft).

2) Low freight costs are another factor. Maine’s proximity to the EU gives it an advantage here; shipping costs from the Maine give it a $4-$5/tonne advantage over the Southeast US, Brazil and Uruguay and a $9-$11/tonne advantage over the Gulf Coast states.

3) Maine is the only state in the region that has the timber resources to provide an adequate, consistent and sustainable raw material supply to a wood pellet facility. Maine's timber inventory includes 662 million cubic meters of growing stock, which produce an excess of 3 million cubic meters annually (growth minus harvests). Maine’s forests are also commercially viable. Unlike most other Northeast states, Maine continues to have a logging infrastructure that is adequate and reliable.

Meeting these three conditions makes Maine a suitable contender for investments in industrial pellet manufacturing for export purposes. With its resources, the state could potentially produce and export 1.5 million tons of pellets annually, a number that is limited due to the timber assets available in the state. Because the cost of wood fiber to make the pellets is higher in the Northeast than it is in either the South or in Brazil, the overall cost of Maine-produced pellets will put it at a disadvantage to the South and on par with pellets from Brazil. Still neither the South nor Brazil will be able to meet all of the demand from Europe, and Maine should expect to see part of the returns.

Comments

Three Reasons Maine Is the Northeast’s Best Bet fo

11-07-2011

[...] Three Reasons Maine Is the Northeast’s Best Bet for Industrial Pellet Investments   November 7, 2011 - 0 Comments   By Pete Stewart – Forest2Market [...]