Clash of the Titans:  The competition between the pulp and paper industry and the energy industry for woody biomass in the South
 

Clash of the Titans: The competition between the pulp and paper industry and the energy industry for woody biomass in the South

on

  • 3,894 views

From a presentation given by Pete Stewart at the Argus Trading Summit 2011. Clash of the Titans: The competition between the pulp and paper industry and the energy industry for woody biomass in the ...

From a presentation given by Pete Stewart at the Argus Trading Summit 2011. Clash of the Titans: The competition between the pulp and paper industry and the energy industry for woody biomass in the South.

http://www.forest2market.com
http://blog.forest2market.com

Statistics

Views

Total Views
3,894
Views on SlideShare
3,320
Embed Views
574

Actions

Likes
0
Downloads
92
Comments
0

4 Embeds 574

http://blog.forest2market.com 532
url_unknown 39
http://www.slideshare.net 2
http://www.forest2market.com 1

Accessibility

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Clash of the Titans:  The competition between the pulp and paper industry and the energy industry for woody biomass in the South Clash of the Titans: The competition between the pulp and paper industry and the energy industry for woody biomass in the South Presentation Transcript

  • Clash of the TitansThe competition between the pulp and paper industry and the energy industry for woody biomass in the South 1
  • Quiz and PrizesQuiz and Prizes © 2011, Forest2Market, Inc. 2
  • Who Am I? Who Am I?Hint: Father of modern wood pulp process © 2011, Forest2Market, Inc. 3
  • Who Am I?• Carl Dahl – Invented kraft pulp process in 1884; same      basic process used in most all pulp mills today• First kraft mill in the United States – Pensacola FL ‐ 1911 First kraft mill in the United States – Pensacola, FL ‐ © 2011, Forest2Market, Inc. 4
  • What Am I?Hint : Piece of equipment that revolutionized the pulp/paper industry © 2011, Forest2Market, Inc. 5
  • A Modern Version © 2011, Forest2Market, Inc. 6
  • What am I?Answer: Recovery Boiler invented by G H Tomlinson in 1931 G.H. 1931. © 2011, Forest2Market, Inc. 7
  • Southern Industry Took Off Southern Industry Took Off U S P u lp Fib er C on sum ptio n 198 0-20 07 So ur ce : FRA an d F2M 280 reen to n 260 240m ill ion gr 220 200 180 1980 1985 1990 1995 2000 2005 © 2011, Forest2Market, Inc. 8
  • What s the Point? What’s the Point?• The pulp and paper industry is OLD. The pulp and paper industry is OLD. —The first suppliers are still in business. • The pulp and paper industry is FIRMLY ESTABLISHED. p p p p y —Long‐term relationships abound.• The pulp and paper industry is the MOST RELIABLE  p p p p y PLAYER IN THE SUPPLY CHAIN. —They receive 9.5 million trucks of logs annually. —$10 billion business. © 2011, Forest2Market, Inc. 9
  • What s New? The Greening of the WorldWhat’s New? The Greening of the World © 2011, Forest2Market, Inc. 10
  • What s New? The Greening of the WorldWhat’s New? The Greening of the World Here © 2011, Forest2Market, Inc. 11
  • What s New? The Greening of the WorldWhat’s New? The Greening of the World There © 2011, Forest2Market, Inc. 12
  • What s New? The Greening of the WorldWhat’s New? The Greening of the World Everywhere y © 2011, Forest2Market, Inc. 13
  • US South Demand US South Demand Tons of wood required at various co-firing rates 7,000 6,000 5,000 5000ton x 1000 4,000 1% 3,000 5% ns 2,000 1,000 - FL GA NC SC VA A M TN AR LA OK L S Based upon current technology and estimates, every 1% of  Based upon current technology and estimates, every 1% of co‐firing requires 10MM tons of wood © 2011, Forest2Market, Inc. 14
  • European Demand•To meet green energy targets of 20% renewables by 2020, the UK must import 20 •To meet green energy targets of 20% renewables by 2020 the UK must import 20 million tons of pellets annually. — If 1/3 is sourced from eastern US, then 8‐12 new pellet plants are needed.•Total EU demand is expected to be 120 million tons by 2020 – more than 10x the •Total EU demand is expected to be 120 million tons by 2020 – more than 10x the world’s installed manufacturing capacity. © 2011, Forest2Market, Inc. 15
  • Why the US South?Why the US South? © 2011, Forest2Market, Inc. 16
  • No g e t betwee u p/ ape a d e gy No Alignment between Pulp/Paper and EnergyPulp and PaperPulp and Paper Renewable Energy Renewable Energy Economic drivers: GDP,   Economic drivers: none;  demographics, population  mandate driven growth  Highly regulated and  Largest producer of  subsidized biomass energy in US biomass energy in US  Vendor to pulp/paper mill – d l / ll Customer of utility – conflict conflict  Compete for same raw Compete for same raw  Compete for same raw  material ‐ woodfuel material ‐ woodfuel © 2011, Forest2Market, Inc. 17
  • Effect of Competition for Wood Fiber on Pulp/Paper Mills P l /P Mill• Fixed mill location/high capital investment /• No new greenfield permits likely• W d fib Wood fiber makes up between 25‐40% of cost of goods sold k b t 25 40% f t f d ld • Earnings are sensitive to movement in raw material price• It’s a good business! It s a good business! © 2011, Forest2Market, Inc. 18
  • US Pulp/Paper Mills Have Strong Worldwide Cost Position Total Cash Cost and Cumulative Production Belgium United States Canada Brazil 800 Bulgaria Canada Chile China Estonia 700 Finland France Germany India Indonesia 600 Italy It l US is competitive worldwide Japan Laos Mexico Morocco 500 New Zealand Norway Cost, USD per FST Poland Portugal 400 Russia South Africa U South Korea Spain Sweden 300 Taiwan Thailand United States Uruguay 200 100 0 0 5 10 15 20 25 30 35 Cumulative Production, FST per Year (x1,000,000) © 2011, Forest2Market, Inc. 19
  • Current Economics Favor Pulp Mills over Bioenergy Markets k• Price of Southern Bleached Softwood Kraft ‐ $ $1,000 per ton• Cost: $670 per ton — Man fact re $500 per ton (incl des oodfiber) Manufacture ‐ $500 per ton (includes woodfiber) — G&A ‐ $50 per ton — Distribution ‐ $70 per ton — Depreciation ‐ $50 per ton• Profit: $330 per ton  © 2011, Forest2Market, Inc. 20
  • US Energy Economics US Energy Economics• Bioenergy – not terribly competitive  – 25‐35 MW plant – $0.13‐0.16/KwH  – 50 MW plant ‐– $0.11‐0.13/KwH – 100 MW plant  – $0.10‐0.12/KwH – 300 MW plant  – $0.09/KwH (maybe?)• Wholesale power rates in US are $0.06‐0.12/KwH. h l l $ / © 2011, Forest2Market, Inc. 21
  • Economics Pellets to EU Economics – Pellets to EU• F2M estimates show that pellets manufactured in the US  South and shipped to Europe are currently a break‐even  South and shipped to Europe are currently a break even proposition. — 350,000 tonnes production ($85 million in capital) — Rail pellets to port  — European customers — Based upon March ENDEX pricing, approximate price FAS US Port is 130 USD/tonne F2M Analysis of Pellet Costs Delivered wood cost 30 USD / Ton Equivalent dry fiber cost in pellets 68 USD / Tonne Manufacturing & transportation costs to port 67 USD / Tonne Total Cost - FAS 135 USD / Tonne © 2011, Forest2Market, Inc. 22
  • Even with economic disadvantage, new demands are undeniable. © 2011, Forest2Market, Inc.
  • New Demand Will Squeeze Supply in Next 10 Years N 10 Y Wood fiber/woodfuel Wood fiber/woodfuel demand 250 30% increase 25 200 30 State renewable stanadards Renewable Energy Standards green tons 150 Wood Pellet ‐ EUmillons of g Pulp/paper 100 180 60% increase 50 25 18 0 Pulp fiber Woodfuel © 2011, Forest2Market, Inc.
  • Export Pellet Market Is Port Dependent Export Pellet Market Is Port Dependent• Where are the pulp mills?  Near ports. y p• Only a handful of US ports can accommodate them: —Appropriate infrastructure : depth, port handling, etc. —Favorable growth/drain ratios in surrounding timber basin —Favorable growth/drain ratios in surrounding timber basin —Space for expansion —Favorable freight rates to EU• These “export” markets will emerge over next 5 years. © 2011, Forest2Market, Inc.
  • Export Pellet Market Is Port DependentExport Pellet Market Is Port Dependent Norfolk, VA Wilmington/Morehead City, NC Charleston, SC Savannah, GA New Orleans, LA Brunswick, GA Panama City, FL y, Mobile, M bil ALBeaumont, TX © 2011, Forest2Market, Inc.
  • Many Pulp Mills Near Ports Norfolk, VA Wilmington/ Morehead City, NC Charleston, SC Savannah, GA New Orleans, LA Brunswick, GA Panama City, FL Mobile, ALBeaumont, TX © 2011, Forest2Market, Inc.
  • How Will It Play Out?• Two‐tiered market development —Export‐driven coastal markets near deep water Export‐driven coastal markets near deep water  ports with bulk handling capabilities. —Domestic market will likely be more  y biomass/bio‐electic centric.• Pulp and paper grades will change. —Uncoated free sheet (copy paper) demand will         continue to erode. —Fluff pulp and containerboard demand will  increase. © 2011, Forest2Market, Inc.
  • Forest2MarketData – Experience – Expertise• Neutral‐third party  (independent in ownership and structure)• Capture of transaction level data is the only way to achieve a true measure  of market price.  Transaction data is the foundation of all our products and  services: – Rigorously expertized by industry professionals – Collected and distributed anonymously  – Broad net ork of data contrib tors Broad network of data contributors • Lumber manufacturers, paper, chip and bioenergy facilities  throughout the south and in the Pacific Northwest  • Large and small timber buying operations Large and small timber buying operations • Private and investor owned sellers• Headquartered in Charlotte, NC;  Western office in Eugene, OR © 2011, Forest2Market, Inc. 29
  • Forest2Market• Relationships – 100% Timberland Investment Management  Organizations – 80% Large forest products companies  – Thousands of landowners, consultants and wood  buyers• Market Intelligence – Resource studies / Market research Resource studies / Market research – Timber price forecasts and economic analysis – Proprietary transaction level sales and cost data – Publications www.forest2market.com © 2011, Forest2Market, Inc. 30
  • Contact Pete Stewart President/CEO 704 540 1440 ext. 11 704 540 1440 ext 11 pete.stewart@forest2market.com Forest2Market®14045 Ballantyne Corporate Place, Suite 150 Charlotte, NC  28277 Charlotte, NC 28277 www.forest2market.com © 2011, Forest2Market, Inc. 31