Low natural gas costs cause dip in biomass prices

By Anna Simet | July 23, 2012

Biomass prices dropped in the U.S. South, Northeast and West during the second quarter of 2012, according to a new report by Wood Resources International.

The main reason for declining prices is the continued fall of natural gas prices to levels not seen in 10 years. Prices for woody biomass in the country—including sawmill byproducts, forest residues or urban wood waste—have been on the decline for most of the last three years, but were higher in late 2011 in most regions than they were five years ago, the report cites.

In the second quarter of 2012, woody biomass prices were down between 2 and 10 percent in the U.S. South, Northeast and in the West, compared to the prior quarter. In the Northwest and California, there continues to be a substantial price discrepancy between mill biomass and forest biomass, but the difference is minimal in the South, according to WRI.

The report goes on to point out that during 2011, natural gas prices fell about 45 percent in the country, and the lower prices have reduced the urgency for investing in woody biomass projects. Despite low natural gas prices, however, plans for more facilities utilizing woody biomass continued during 2011 and 2012 in both Canada and the U.S., with some projects nearing completion and others in start-up mode.

Wood fiber demand for all planned biomass projects in the U.S. dropped in the first half of 2012 as compared to early 2011. Most of the decrease in wood usage the past year has been wood used in the generation of electricity for the domestic market in the U.S., while the pellet industry has continuously expanded capacity to serve the growing demand in Europe.

In related news, biofuel company Coskata Inc. recently announced it was changing its plan to use woody biomass as a feedstock at its planned cellulosic ethanol plant, instead moving to natural gas. The news accompanied the announcement that Coskata was shelving its $100 million initial public offering, and moving its proposed plant from Alabama to a new location that has not yet been announced.