Global Trends Review, November 11-17, 2013: Danish pellet imports to reach 3 million t by 2020; mixed fortunes for equipment producers in Q3

The Danish government has issued a report on its domestic market for wood pellets with the USDA Foreign Agricultural Service’s Global Agricultural Information Network. According to the report quoted by Fordaq, Denmark is the number one importer of wood pellets in the world. Based on official statistics, Danish Government policy and private sector investments, Danish imports are expected to increase from 2 million tonnes in 2012 to over 3 million tonnes in 2020, says the report.

In Denmark, wood pellets are being used in small boilers in private homes, medium sized district heating plants and in large combined heat and power (CHP) plants. Since 2010, the main driver of growth has been large scale CHP plants that have been replacing coal. Current use is estimated at about 1 million tonnes.

Since 2000, Danish production of wood pellets has been fluctuating between 130,000 and 200,000 tonnes annually and is to a large extent based on residues from the furniture and wood processing industry. Due to the limited domestic feedstock supply and the rapidly increased use by large CHP plants, Denmark has become the number one wood pellet importer in the world. In 2012, Denmark imported 2 million tonnes of wood pellets with a value of $350 million. During the first seven months of 2013, imports increased by 10%.

Currently, the Danish sector is mainly importing from the Baltic Region, 960,000 tonnes in 2012, and Russia, 348,000 tonnes in 2012. It is to note that according to the data published in WhatWood Weekly, average import price of Latvian, Estonian and Russian pellets on the Danish market in the summer of 2013 was roughly the same – around $170-190. A key factor to capture the market and benefit from the growth potential is the sustainability of the supply. The Danish Government is currently analysing the sustainability of different supplies of biomass and will base its further policy and funding on this analysis.

In March 2012, a historic new Energy Agreement was reached in Denmark. The Agreement contains a wide range of ambitious initiatives, bringing Denmark closer to the target of 100% renewable energy in the energy and transport sectors by 2050.

Consumption of biofuels for transport will stand at 10% in 2020. Large-scale CHP plants will switch from coal to biomass, and by 2030 it is planned to completely phase out coal use. This could support a further increase in the use of wood pellets. However, an increasing share of electricity is planned to be generated by wind – 50% in 2020.

Large power plants using biomass are now supported by subsidies in the form of feed-in tariffs of €20 per MWh, this is about €96 per tonne of wood pellets. Biomass as fuel for heat generation does not receive any funds. In order for the conversion to be economically feasible, producers are awaiting for changes in the regulation.

Supported by government funding, the Danish energy company Dong Energy is planning to convert three power plants from fossil fuels to multi-fuel plants, able to combust gas, coal as well as biomass. Two of these plants will be able to use pellets, while the third will mainly burn wood chips.

The Californian company, Rentech Inc., will increase its output of pellets by an extra 350,000 tonnes per year, Fordaq said quoting the Chronicle Journal report. The company’s Atitokan plant production will more than double up to 100,000 tonnes of pellets.

Moreover, the former Weyerhaeuser mill, which was acquired by Rentech last year, will undergo a conversion procedure and be transformed into a wood pellets plant. The annual output will reach a peak of 300,000 tonnes per year by 2016. The pellets will be shipped into the UK market, at Drax’s Power plant, which is currently converting much of its coal-powered generation facility to sustainable biomass fuel energy production.

Mixed fortunes for equipment producers in Q3

The year 2013 might close better than expected in the past few months for Italian woodworking manufacturers, as reported by the industry association Acimall. The trend seems to be slightly more positive than the same period of 2012, with orders growing by 3% in Q3. This time, the strongest driver is the domestic market, scoring a significant increase by 14.4% after reaching the bottom in the past two years.

Dieffenbacher had sold a total of 14 production lines with continuous presses through its Woodworking Technology division by the end of October 2013. This figure is already much higher than last year’s total. Eight orders were for machinery sold through Dieffenbacher’s majority stake in Shanghai Wood-Based Panels Machinery (SWBPM). The division’s order backlog had swelled to around €670 million by the end of September.

Homag Group has reported a 4.4% reduction in order intake to €142.1 million in the third quarter of 2013 from €148.6 million in the previous quarter. However, new orders were 13.8% higher than the same stretch last year.

At the same time, Finnish plywood machinery producer Raute is considering negotiations on adaptation measures at its Nastola and Jyvaskyla units, concerning 355 employees. The company estimates that the initiated negotiations concern temporary lay-offs of at most 90 days. The changes in order intake forecast for the next few months will not have an impact on Raute’s previously published outlook for the whole of 2013. Net sales are expected to decline from 2012. The operating profit is expected to weaken significantly from the previous year but to remain positive.

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A company from North-East England says that much of timber demand now comes from the south-east of the country, and the increased construction activity first became apparent in this region, TTJ reported.

The value of UK redwood imports in January-August was up 4% on a year ago. Strong softwood volumes from Latvia in the month of August resulted in Latvia’s UK shipments growing 8% for the eight-month period. Growth from Russia (+5%) has also helped offset the decline in volume from Sweden (-9%) and Germany (-13%).

The British BSW Timber company has decided to expand its sawmill in Riga in 2015. The investment should boost annual production of currently 120,000 m3 to 200,000 m3, a volume for which about 400,000 m3 of logs need to be converted. The sawmill will process softwood logs between 3m and 6m length. The project will be supported by the Latvian Investment and Development Agency.

China will remove more outdated pulp and paper capacities from the home market in order to advance economic restructuring. Around 300 companies are requested to close down obsolete machines. China’s pulp and paper industry should remove more than 7.4 million tonnes of outdated capacity from the market by the year’s end.

Mills of the affected producers are too small and thus ineffective and cost-intensive, cause too much pollution, infringe land usage rights or do not make products of adequate quality. The government also hopes this measure will reduce surplus supply.

WhatWood’s reviews are prepared using corporate press releases, Holzkurier, Timber Trades Journal, Fordaq, EUWID Wood Products, ITTO, ForestTalk, and EUWID Paper.