Forest2Market Study: Fears Export Wood Pellet Industry Harms Forests, Industry Unfounded

The U.S. export of wood pellets to meet renewable energy goals in the European Union has caused some to question the impact of pellet mills on the sustainability of U.S. Southern forests (Atlantic and Gulf regions), as well as on the price of pine and hardwood in those regions. A new report[1] by Forest2Market using U.S. government and marketplace data strongly demonstrates the pellet market is not a threat to those forests and does not act alone to impact the competitive marketplace. The report was commissioned by the U.S. Endowment for Forestry and Communities, National Alliance of Forest Owners (NAFO) and the U.S. Industrial Pellet Association (USIPA).

Key Takeaways

Industrial pellet exports represent a very small part of forest removals in the U.S. South.

• Pellet exports from the U.S. South represent 0.08% of forest inventory.
  • In 2014, pine removals for industrial pellet production totaled 3.7 million tons[2] or 0.3% of the pine pulpwood inventory and 0.09% of the total pine inventory.
  • In 2014, hardwood removals for industrial pellet production totaled approximately 2.4 million tons or 0.2% of the hardwood pulpwood and 0.06% of the total hardwood inventory.
• In 2014, industrial pellet exports from the U.S. South to Europe, which represent the vast majority of U.S. pellet exports, were 3.6 million metric tons, or 40% of Europe’s 9 million metric ton industrial pellet consumption.
• Total removals of wood for all markets[3] in the U.S. South is 3.3% of the total forest inventory annually.

Future industrial demand for U.S. pellets overseas represents 0.3% of the current total forest inventory in the U.S. South.

• Existing and under construction industrial export pellet plants in the U.S. will eventually produce 7.4 million metric tons of pellets to meet demand from funded biomass projects in Europe. 
• Realistic demand and market share outlooks show that U.S. industrial exports of biomass pellets to Europe could eventually rise to 10.8 million metric tons. 
• Annual removals to meet this demand would total 25 million tons, which represents 1.0% of pulpwood inventory and 0.3% of total forest inventory in the U.S. South.

There is no compelling evidence that pellet mills alone have impacted pricing in the competitive marketplace nor forced non-pellet mills to close.

• In 2014 removals for pellets totaled 2.4% of total removals from Southern forests.
• Price fluctuations are similar in micro-markets where pellet mills are located and adjacent markets where they are not.
• In areas where prices have increased, the introduction of pellet demand has not been the sole reason for price increases; other significant drivers include supply restrictions caused by changes in land and mill ownership, the housing crisis and Great Recession and above-average rainfall, as well as additional demand from OSB and pulp and paper mills.
• The few closures of competing mills are the result of lagging demand for end products, not increased competition from pellet mills.

Earlier predictions about the fate of U.S. Southern Forests have been false.

• The proliferation of wood chip mills in the U.S. South between 1985 and 2000 generated controversial claims similar to those made about export pellet facilities. Those claims proved to be false.
• The expansion of chip mills did not impact the sustainability of Southern forests.
• The total volume of inventory in the U.S. South has increased 18.7% since 2000.

Read the full report, Wood Supply Trends in the US South, 1995-2015

Notes

[1] Wood Supply Market Trends in the US South: 1995 – 2015, Forest2Market Inc., November 2015.

[2] Consistent with industry practice in the US, all references in this report to wood fiber represent green wood measured in short tons unless otherwise stated. Because industrial wood pellets are primarily consumed in countries that use the metric system, all references in this report to wood pellets are reported in metric tons.

[3] Wood Supply Market Trends in the US South: 1995 – 2015, Forest2Market Inc., November 2015. This includes all pine and hardwood pulpwood and sawtimber.