Tuesday, August 5, 2008

Southern Forest Industry Braces for Bioenergy

(BUSINESS WIRE)--Emerging biomass markets will significantly strengthen demand for wood fiber in the South, driving prices higher for forest products as the United States turns to alternative fuels for energy, according to a study released Monday by Forest2Market.

The new demand will be fueled by wood-burning power companies that produce and sell electricity to public utilities, as well as an increasing amount of wood pellets that are exported to European energy markets. The development of new facilities that turn biomass into cellulosic ethanol for transportation fuel will also impact the forest products industry.

As a result, demand for wood fiber from these emerging markets is expected to climb from 2 million tons in 2008 to at least 13.5 million tons in 2020, according to Forest2Market, a provider of pricing information and analysis for forest products. However, the estimate is conservative, and it could be adjusted higher as more companies announce plans to build biomass facilities.

The new study, Quantifying Forest Biomass Resources in the U.S. South, is the first to analyze the impact of bioenergy markets on the forest products industry. The report quantifies the industrys changing landscape, looking specifically at the effects of forest biomass on wood fiber supplies, demand and prices.

The pace of the development of bioenergy markets and the resource requirements to feed them will disrupt the entire southern wood fiber market, said Pete Stewart, president and founder of Forest2Market. It will be much steeper and more disruptive than that of the OSB market over the last 15 years. We recommend that forest products companies begin planning for the future by establishing stronger relationships with their suppliers and creating more efficient transportation lines.

Faced with rising oil prices, an international push for clean energy projects and a continued focus on reducing carbon emissions, federal and state governments have spent millions on biomass research and development. As a result, new energy markets are emerging that rely on southern forests for resources.

The primary supply for the growing demand is pulpwood and wood chips, and prices for pulpwood and chips are expected to rise. Secondary sources include construction and demolition debris, as well as leftover woody biomass from harvesting operations, such as tree limbs.

We were beginning to see the effects of new energy markets in the delivered prices for pulpwood, chips and wood fuel in some areas in the South, Stewart said. We thought it was time to take a closer look, using the breadth and depth of our data, to determine what the competitive landscape for wood fiber might look like in 10 or 15 years.

The study is based on Forest2Markets unique database of transaction-level information gathered from millions of shipments to mills throughout the South. The study will help lay the groundwork for strategic decision making that traditional forest products and new bioenergy companies will need to survive in the future.

Based in Charlotte, N.C., Forest2Market has developed sophisticated analytical tools to accurately forecast timber prices in the U.S. South and Pacific Northwest. The companys delivered price benchmark product is used by industry professionals to set timber prices for contracts, supply agreements and bids. The price information is more accurate because it is based on transaction-level data not surveys. For more information, visit www.forest2market.com.


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