Quick Takes from WPAC 2016
I arrived in Harrison Hot Springs yesterday after driving 90 minutes east from Vancouver airport surrounded by Canada’s immense forest resource. I wanted to step away from the conference proceedings for just a moment to share with you some discussions that made an immediate impression on me.
1. There is some heartburn over the Sustainable Biomass Partnership certification process. Candidly, this is the first time I had heard that there was any disgruntlement over the certification scheme and process. That said, this conversation dominated yesterday’s afternoon proceedings. Arnold Dale of Ekman pointed out that Canada has yet to achieve one single SBP certified wood pellet production facility and asked his panel why they thought that was. Answers varied, but the theme that emerged was that the reporting requirements overburdened plant staff. At dinner an attendee called to my attention that Brian Moran from Drax (who has successfully earned SBP certification for its mills in the southeastern United States) talked about the sustainability “team” that was a part of that effort and that, for contrast, at least one of the Canadian producers remarked that the certification process may well require them to hire a person dedicated to the effort. From this attendees perspective, the differences between the two approaches were telling. The discussion carried over into this morning’s proceedings as well. Henry Pease from RWE countered Dale and others comments by noting that SBP certification is how the pellet buying utilities protect their social license to burn biomass in the first place. There was also some angst about the cost of certification and per ton fees now falling to the producer. Whispers of this per ton fees being delayed were circulated, but I haven’t had time to confirm this with SBP.
2. Canada needs a long term Asia buyer to emerge. Probably this isn’t news to anyone reading this but I was struck by the lack of discussion about the South Korean marketplace. It is clear now that North American producers, Canadians and Americans alike, have ceded that market to ultra-low producers in the region, mostly Vietnam. My goal for the afternoon and the evening is to speak with the numerous Japanese attendees that are here as the list of Asian prospects for every Canadian producer begins with Japan. Producers in western Canada look forward to leveraging the advantage they have in transit distances and are hopeful that Japan's willingess to enter into longer term contracts will offer some steady, long term market growth opportunities. We’re dedicating the bulk of our final issue of Pellet Mill Magazine to the potential Japanese pellet market and I’d like to walk out of here with more than a few sources if possible.
3. The size, scope and trajectory of the domestic pellet market in Canada is frustratingly, for Gordon Murray at least, opaque. The WPAC has teamed up with an established lumber market report provider (Madison’s Lumber Reporter) to build a subscription based report to remedy this. Keta Kosman, the editor of Madison’s talked about her first efforts into the endeavor and the challenges that she is already encountering. I smiled inside when a member of the audience asked how big of a handgun she’ll use to threaten producers to share real production numbers with her. I only smile because while our business model does not include market price reporting, we do engage in ongoing outreach to producers and know that it is challenging to say the least. (This seems like a decent time to remind any producer reading this that we’ve currently got a survey underway. If you haven’t seen the link come across your inbox, please send me a note). I’m as interested in Murray’s hunger for this information as much as I am in Madison’s ability to get it done. Pellet producers in Canada know that a domestic market would provide them additional markets and it is clearly top of mind for Murray.
4. After taking a two-year pause, expect pellet volumes to being flowing into the Netherlands at some point in 2017. This discussion point was touched on twice this morning, first by Rachel Levinson with Argus and later by Henry Pease. The potential for 3.5 million tons per year that we’ve all heard and you’ve seen reported here is still out there, but exactly when or if that volume will be achieved is anyone’s guess. For me, the bellwether for Dutch pellet consumption will be Amer 9, the coal plant with a history of biomass co-firing and the first plant expected to begin co-firing biomass again. The earliest date for startup shared this morning was September of 2017. The latest was summer of 2018. For me, biomass inclusion at Amer will signal the start of a biomass renaissance in the Netherlands.