Wood has been used for heating and fuel purposes for thousands of years. The wood industry has found itself on the verge of a revolution, however, because of the rapid increase in development and utilization of new wood-based solid and liquid fuels. Wood pellets represent an alternative to the use of coal, gas and even traditional wood logs and chips. Wood pellets are cylindrical, compressed wood particles used as burning fuel. Pellet size varies from one-fourth to one-third inches (6 to 8 millimeters) diameter and 1 to 1.5 inches (38 millimeters) in length, with a bulk density that is usually about 40 pounds per cubic feet (about two to three times the wood density of softwood).
 
 Based on the principle of densification of dried wood chips and sawdust, pellets offer better and more uniform heating properties per unit volume due to their low moisture content. Pellets burn cleaner, have reduced particulate emissions compared with coal, are more economical to transport due to increased bulk density and can be easily produced from wood waste and byproducts. This provides new ways to divert wood waste from reaching landfills as well as to increase overall profit through an integral and more efficient use of the raw material. Wood pellet applications vary from household heating to large-scale industrial power generation. It is important to emphasize that wood pellets are not a new product, they have been utilized for decades, but it is only now that the world is experiencing a large demand increase, and wood pellet potential is still underestimated.
 
 
 Global Market
 
 During the past four years, the global wood pellets market has experienced a dramatic increase. Global production went from almost 8 million tons per year1 in 2007 to more than 13 million tons in 2009, of which European countries consumed more than 8 million tons (2009). North America produced about 7 million tons in 2009, of which almost 5 million tons were intended for exports to Europe. Leading countries in the consumption of pellets in Europe are Sweden, Austria and Finland, while Germany, France and Italy are experiencing the largest market growth in both capacity and consumption of pellets. Russia is also increasing its production capacity and may become a key player for exports in the near future. In addition, countries such as Denmark, Belgium and Norway are experiencing the most significant increase of the region in pellet consumption. According to the European Biomass Association, it is expected that Europe will reach a consumption of 50 million tons per year by 2020 compared with 8 million tons per year in 2009. Regardless of increased production and consumption, European countries will have a lack of production capacity to satisfy the internal demand, mainly due to the scarce availability of sustainable sources of raw material in the EU. With an increasing demand from several European countries, and few exporters besides Canada and Germany, U.S. producers are finding a growing market that literally exploded, increasing from 2002 through 2006 by more than 200 percent. Despite this large increase in production, most pellets manufactured in the U.S. were intended for domestic consumption. Canada has dedicated more than 80 percent of its production for the export market, mainly to European countries, and is the largest exporter of wood pellets in the world. With the opening of several new facilities in the Southern U.S, the capacity for exports has expanded and European countries with demand for pellets, such as Sweden, Italy, Denmark and Norway, may take advantage of their better prices, faster shipping, and a steady availability and supply of pellets from these U.S. facilities. These countries may switch from their traditional Canadian supplier, depending on delivered prices and long-term supply agreements. The market for other continents, excluding North America and Europe remain marginal, with combined production of only 0.3 million tons per year. South America, Africa and Asia are far behind in the race for market share and positioning in the pellet market. These players must not be underestimated, however, especially countries such as Brazil. With the availability of raw material, and well-established wood and paper industry, it will be a matter of time for Brazil to become a key player in the wood pellets market.
 
 The U.S South has the ability to supply pellets for the European market at a competitive price because of enhanced production capacity due to a sustainable wood source from plantations. In addition, it may become a better alternative for European buyers than Canada, because of the locations of important ports, better road infrastructure and year-round harvesting. U.S. producers can achieve long-term agreements with European customers because of the increased demand for pellets, and the lack of resources (production capacity and raw material availability) to internally satisfy the demand.
 
 
 Wood Pellet Pricing
 
 Wood pellet prices in the U.S. are heavily affected by transportation costs. Since the most common delivery system in European countries is in bulk cargo, prices in Europe tend to be more stable around €215 per ton ($304 per ton2). Pellets in the U.S. are sold in bags by retailers, adding about $20 per ton in packing, pallets and wrapping material. With an average price of $276 per ton as of November, pellets can be found for as low as $176 per ton, or as high as $600 per ton in the Northern U.S. However, for U.S. companies intending to compete in the export market, the price for warehousing and the ocean freight costs must be taken into consideration. Warehouse costs may add around an additional $10 per ton, while ocean freight (which can be extremely volatile) adds $35 to $45 per ton to the price of pellets. The fact that pellets are not considered a commodity also affects the price. When they are considered a commodity, prices will have less variability, but will still be strongly affected by transportation costs and raw material availability. This wood pellet commodity market could be developed using futures contracts as with lumber, oil and other products.
 
 
 New Facilities 
 
 The U.S. wood pellet industry has been characterized as being dominated by several small- to medium-sized factories. The definition of a medium or large factory needs to be redefined, however. Typically, a large factory was considered to be producing about 100,000 tons per year. In recent years, several facilities in the Southern U.S. have started operations, producing more than 500,000 tons per year. The opening of such facilities redefines the term large-scale production in the wood pellet market. In addition, there are several facilities planned, permitted and ready to break ground, and several others projected to start construction as this article was being written, including four facilities from Phoenix Renewable Energy, planned in Arkansas. The largest wood pellet facility in the world started operations in 2007 in Cottondale, Fla., mainly producing and shipping pellets to Sweden. Several multinational corporations are investing in pellet facilities and operations; recently, Weyerhaeuser and Mitsubishi announced a strategic memorandum of understanding in order to explore and establish the feasibility of a pellet production facility in the U.S. by 2011, and depending on its success, more facilities could follow in the next few years.
 
 In Georgia, RWE Innogy is building a factory with the capacity to produce 1 million tons of pellets per year. More factories of similar size are projected in South Carolina and Georgia, intended for the export market to Europe. Germany has seen its pellet industry grow exponentially becoming an important exporter to neighboring countries. Since 2004, approximately 35 new facilities, in addition to the previously existent 15 plants, have started operations. With an average capacity of 66,000 tons per year, and several new facilities planned for 2010 and 2011, the potential of Germany as producer and exporter is now significant, and it's able to absorb market share from North American manufacturers. Canadian producers have also launched several new facilities. With a well-established market for exports and solid producers such as Pinnacle, looking for a business expansion, the number of factories in Canada has been significantly increased in the past four years, adding additional capacity for European exports. U.S. producers still have an advantage compared with Canadian manufacturers regarding shipping ports and strategies. States such as Florida, Georgia, South Carolina and Virginia, all have proximity to important ports, a railroad system and a sustainable source of plantation grown wood for production, resulting in lower transportation costs and minimized storage time. Many of these Southern U.S. ports have a long history of wood chip, lumber, log, pulp and paper exports. In less than five years, the U.S. South's pellet industry has transformed from virtually nonexistent to producing 2 million tons in 2009. New pellet facilities have also been announced in the Northern U.S. (New Hampshire, New England Pellets), and the west (Oregon and California, Enligna U.S.). Southern states will still lead the pellet market development, based on the number of facilities announced and in recent operational status. 
 
 For the U.S. domestic market, however, a single large-capacity factory may not be economically profitable, especially since wood pellets are mostly sold in bags. Transportation to several destinations from a single production site might make prices prohibitive to retail buyers. This market will require special attention in order to grow, and a solution for pellet companies may rely on having several small factories rather than one single large facility, especially when accessibility to roads, railroads and storage space is limited.
 
 
 Well-Established Technology
 
 The process for making wood pellets is fairly simple, and has been well-established and developed. The main issues to take into consideration are moisture content and wood species used in the process, making manufacturing a process of finding the right "recipe" for production conditions rather than a technological upgrade. Building requirements and labor for a pellet plant are relatively low. The key element for a pellet plant is having the criteria to choose the right equipment and capacities, especially when handling large production volumes, where typical investment levels can reach more than $30 million in equipment (for plants producing 200,000 tons per year). Nevertheless, by increasing the size of the facilities, some issues arise. Problems such as self-heating of the pellets while being stored, cooling of big volumes of pellets in the manufacturing process, utilization of local wood species with different properties that may affect production parameters and throughputs. The quality, condensation and crumbling of pellets while being transported as well as pellets from mixed species and wood waste must be managed. Production considerations for the pelletization of torrefied wood at an industrial level may represent great opportunities and technological advances that need to be addressed in order to ensure growth and sustainability of this market for the U.S. wood industry. 
 
 
 Final Remarks
 
 The right conditions for a massive scale of wood pellet production in the U.S exist. With high import requirements from European countries, and favorable manufacturing conditions and raw material availability that can be found in the Southern U.S., both small and large producers are finding a market niche that must be filled. The wood pellet market seems promisingly sustainable for years to come. In order to become reliable European market suppliers, U.S. producers must solve large-scale production issues regarding warehouse strategy, self-heating, transportation, handling and capital investment. The volatility of pellet prices in the U.S. has to be addressed in order to ensure the sustainability of the market. As a final thought, the technical feasibility for pelletizing torrefied wood must be further developed, due to the promising results and enhanced heating value provided by this material. BIO
 
 
 References:
 
 1Every weight unit expressed in tons is referred to metric tons of pellets, at 10 percent moisture content. One metric ton equals 1.2 short tons.
 
 2Calculated at a exchange rate of 1 Euro=1.412 U.S. dollars (01/23/2010)
 
 Adrian Pirraglia is a PhD candidate of wood products at North Carolina State University, Ronalds Gonzalez is a PhD candidate of paper science and engineering at NCSU, Daniel Saloni is an assistant professor in the Department of Wood and Paper Science at NCSU and Jeff Wright is an adjunct faculty member at NCSU. The author's research group has been working on several projects for energy densification and the economics of ethanol production during the past four years. Achievements of the group include the development of techno-economical models for pellet production, harvesting and transportation of biomass, material testing and characterization as well as market analysis.

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The competitive advantage of the Southern U.S. relies on shortened shipping times, as compared with many British Columbia, Canada, factories, whose travel route takes shipments through the Panama Canal. Opportunities are opened, as Italy, Belgium, an

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The world pellets consumption for the next 10 years is projected to increase by 25 percent annually, reaching nearly 140 million tons by 2020. Previous projected growth for 2010 was already surpassed by 2009, reaching more than 13 million tons. This 

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The typical price range for wood pellets in the most important markets in the world is notably higher for European countries, giving an advantage to exporters with low raw material and transportation costs when entering these markets

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The price composition for wood pellets at the mill gate reflects that energy, raw material (biomass), and labor are key cost drivers in the production of pellets. Energy costs include drying the wood chips prior to pelletizing, which usually can acco

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The pelleting process is relatively simple depending on how the raw material is received, with processes such as chipping, drying and grinding, being optional. 

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The conditions are ripe for a massive increase in the production of wood pellets in the U.S. due to demand from European countries, favorable manufacturing conditions and the availability of raw 
materials, especially in the South.

Wood Pellets: An Expanding Market Opportunity

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