Export of wood pellets from British Columbia : a study about the production environment and international competitiveness of wood pellets from British Columbia

The global wood pellet market has seen a rapid growth after the adoption of the Kyoto protocol and the renewable energy incentives created within the European Union. The global consumption of wood pellets reached 13,5 million tonnes in 2010 and several experts estimate the consumption to be between 35-50 million tonnes by 2020. These forescasts raise the questions which regions that can supply this vast amount of wood pellets and what the conditions are for producing it. 
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\nThis study evaluates the conditions for wood pellet production and export from British Columbia, on Canada’s west coast, focusing on existing industry structure, raw material supply and the distribution chain. The price competitiveness of British Columbian wood pellets export will also be examined and future challenges identified. The study is based on case-study research method with several sources of data collection such as literature studies, seminar proceedings and semi-structured interviews. 
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\nThe production capacity for the wood pellet industry in British Columbia has grown with about 4000% from 1996 to 2011 (50 000 tonnes to almost 2 million tonnes). A large part of this capacity has been added during recent years with 800 000 tonnes increased production capacity in 2010-2011. About 95% of the wood pellets produced in British Columbia are shipped to the European market. The general opinion expressed by the interviewed actors is that the rapid growth in production capacity will slow down and we will see a more moderate growth in the near future. The major reason for this is that the available raw material for increased production is more expensive. There exists a vast amount of mountain pine beetle killed trees in the province, about 700 million m3 of pine have been killed from 1998 to 2010, but the price of using whole trees for wood pellet production has been found more expensive than the traditional raw material for pellet production; mill residues. A raw material source that is more likely to contribute to an increased production in the near future is harvest residues. 
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\nThe wood pellets exported from British Columbia to date has mainly supplied the European market, and mainly bulk consumers. The South Korean market has been identified as a future market due to their newly introduced renewable energy targets. The price competitiveness of wood pellets from British Columbia has been found to a large extent be dependent on the price fluctuation for the cost of sea freight. The price in Vancouver port has recently been fluctuating from €95 to €118/tonne (FOB). The shipping market has been rather volatile during recent years and the price of shipping from Vancouver to Rotterdam has fluctuated between €19 to €75/tonne between 2001 and 2007. The current price for shipping has been estimated to be €25/tonne to the Netherlands which result in a delivered price from 120 to 143€/tonne for British Columbian wood pellets in Europe. The bulk prices in European ports have during the last years fluctuated between €115-145/tonne. This makes wood pellets from British Columbia price competitive in Europe and can explain why Europe is the major market for British Columbian wood pellets.
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\nThe current shipping price of wood pellets from Vancouver to South Korea has been estimated to be €18/tonne. This would result in a delivered price in South Korea of €113-136 /tonne. The price for wood pellets on the South Korean market has recently fluctuated from €91 to €116/tonne. This reveals that British Columbian wood pellets currently have difficulties to be cost competitive on this market. A future success for British Columbian wood pellets on the South Korean market is dependent on how much wood pellets or similar biomass based products that can be delivered from Asian countries which currently have a lower price level. 
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\nSeveral future challenges for the future wood pellet export have been identified in this study. There is currently only one terminal that is handling wood pellets for bulk export in British Columbia and only one rail company that transports the pellets from the production facilities to the port. An increased competition on this market is likely to affect the price of distribution. Another interesting area for the future development is if torrefied pellets can be produced in a cost efficient and safe way. Torrefied pellets have theoretically better properties for long distance shipment due to higher energy density and does not have the same demand for storage facilities as regular wood pellets. 
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