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Woody Biomass             Fact vs. Fiction                    Dean McCraw CF                   McCraw Energy LLC          ...
McCraw Energy LLCWe provide a variety of services for the bioenergy field. These include:    Assessment of forest invento...
Background• There is nothing new under the sun• Renewable energy was all the rage from the mid-70’s  to the mid-80’s• The ...
mccrawenergy.com
Background• The main new competitor for pine pulpwood is  the energy market in Europe.• These are not free markets. These ...
“Men, it has been well said,      think in herds; it will be seen      that they go mad in herds,      while they only rec...
mccrawenergy.com
PROJECTIONS FOR FUTURE GROWTH OF                          EUROPEAN PELLET MARKETS (IN MILLION MT)                         ...
SHIPPING COST FROM THE SOUTHEAST ARE               COMPETITIVE COMPARED TO MOST REGIONS                                   ...
Southern Forest Research Station, Forest Inventory & Analysis, The Inventory, March 2009mccrawenergy.com
mccrawenergy.com
Southern Seedling Planting all Owners & all States: 1925-2009                3,000,000                2,500,000           ...
Planting numbers• Some have questioned these planting numbers.• However the nursery numbers bear them out.• ArborGen, the ...
How did we get here?• In the 80’s and on to the late 90’s, pine pulpwood  shortages, especially during periods of wet  wea...
How did we get here?• When these stands reached thinning age  starting in around 1999, we saw a glut of  pulpwood on the m...
Present state of things• Presently we have an overabundance of small  and large sawtimber on the market. The 3  million ac...
Present state of things• Industrial landowners (TIMOs & REITs)are not  helping the situation as most have lowered  plantin...
mccrawenergy.com
Present state of things• Additional dangers to forest plantation  acreage may be in our current commodity  pricing. With c...
Present state of things        “The reports of my death are greatly               exaggerated.” Mark Twain•   This can als...
US South Daily Pulp/Paper Mill Wood Usage            80,000            70,000            60,000            50,000 Tons/Day...
mccrawenergy.com
Recent Pulp PricingDissolving pulp prices on world markets haveskyrocketed from protracted lows of $300 to$500 per ton fro...
Present state of things• At this level of pricing, pulp mills are making  more than $300/ton.• Typically a mill uses aroun...
Present state of things• In recent months I have received feedback  from several sources on the FIA numbers.• These number...
CHART 4                   SOURCE: F&W Forestry Services (2007)mccrawenergy.com
Southern Forest Research Station, Forest Inventory & Analysis, The Inventory, September 2011mccrawenergy.com
What does the future hold?Here are some possible scenarios;• Southern pine plantations will be heavily stocked  with sawti...
45                                                South-wide Pine Stumpage Prices        40        35        30           ...
What does the future hold?• The volumes of forest residue will increase as we all  know that larger trees have larger limb...
Summary• The reduction in pine pulpwood inventories will impact  all users, the existing pulp/paper industry and the new  ...
Questionsmccrawenergy.com
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Florida Energy Summit Dean Mc Craw

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Presentation for the Florida Energy Summit in Orlando on October 26, 2011

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Florida Energy Summit Dean Mc Craw

  1. 1. Woody Biomass Fact vs. Fiction Dean McCraw CF McCraw Energy LLC 10/26/2011mccrawenergy.com
  2. 2. McCraw Energy LLCWe provide a variety of services for the bioenergy field. These include:  Assessment of forest inventories, including forest residue.  Valuation of delivered bioenergy feedstocks.  Long range planning, including assessment of options to increase future feedstock supplies.  Establishment of a bioenergy feedstock procurement organization. This can include contract procurement or the training of personnel for your facility.  Contract production and/or delivery of forest residue.  Design consultation on feedstock receiving facility.  Contract operation of feedstock receiving facility.  Consultation and/or contract establishment of energy tree plantations and energy grasses.  Business contacts with all major forest landowners in the Southeastern USmccrawenergy.com
  3. 3. Background• There is nothing new under the sun• Renewable energy was all the rage from the mid-70’s to the mid-80’s• The difference from then to now is that in the 80’s the Forest Products Industry was a leader and now it may be a victim.• The main driver in the 80’s was energy cost savings. Today this can still be the case but politics now has a larger role than energy cost savings.• New players are entering the market and competing in the pine pulpwood markets.mccrawenergy.com
  4. 4. mccrawenergy.com
  5. 5. Background• The main new competitor for pine pulpwood is the energy market in Europe.• These are not free markets. These are driven by government policy as the EU is a signer of the Kyoto Protocol.• Large growth projected for this market moving forward.• This assumes that present EU economical problems do not bring about a downfall of the EU.mccrawenergy.com
  6. 6. “Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.” Charles MacKay, Extraordinary Popular Delusions and the Madness of Crowdsmccrawenergy.com
  7. 7. mccrawenergy.com
  8. 8. PROJECTIONS FOR FUTURE GROWTH OF EUROPEAN PELLET MARKETS (IN MILLION MT) European Demand 90 Poyry 80 70 RWE (Europe) 60 million tonnes Mitsubishi 50 40 AEBIOM 30 20 Rotterdam Port 10 Enviva Expectation 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: U.S. Industrial Pellet Associationmccrawenergy.com
  9. 9. SHIPPING COST FROM THE SOUTHEAST ARE COMPETITIVE COMPARED TO MOST REGIONS DK/SW €20-€25 Bel/UK €30-€35 (Winter shipping challenge) Source: Poyrymccrawenergy.com
  10. 10. Southern Forest Research Station, Forest Inventory & Analysis, The Inventory, March 2009mccrawenergy.com
  11. 11. mccrawenergy.com
  12. 12. Southern Seedling Planting all Owners & all States: 1925-2009 3,000,000 2,500,000 CRPAcres Planted 2,000,000 1,500,000 1,000,000 500,000 - 1925 1931 1977 1983 1927 1929 1933 1935 1937 1939 1941 1943 1945 1947 1949 1951 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1979 1981 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Auburn University Forest Seedling Nursery Coop - Data from USFS and GFC mccrawenergy.com
  13. 13. Planting numbers• Some have questioned these planting numbers.• However the nursery numbers bear them out.• ArborGen, the largest seedling producer in the world, has seen a 49% decline in seedlings shipped from 2001 to 2009.• In 2000 I was responsible for the production and planting of 45MM seedlings. That same company will plant 18MM seedlings this next year, a decline of 60%.mccrawenergy.com
  14. 14. How did we get here?• In the 80’s and on to the late 90’s, pine pulpwood shortages, especially during periods of wet weather, where not uncommon. During this period overcutting of timber growing stock was common.• Our present situation is a result of this late 80’s CRP, or as we now hear it referred to “unintended consequences.”• We added an additional 3 million acres of pine timberland in the South.• As this has moved thru the system it has caused some real problems.mccrawenergy.com
  15. 15. How did we get here?• When these stands reached thinning age starting in around 1999, we saw a glut of pulpwood on the market.• There were cases of landowners in Georgia having to pay loggers to thin their CRP stands.• This glut of pulpwood also coincided with major changes in timberland ownership as many integrated forest products companies disposed of their timberlands.mccrawenergy.com
  16. 16. Present state of things• Presently we have an overabundance of small and large sawtimber on the market. The 3 million acres of land planted during the late 80’s CRP program is now ready to harvest.• This happens to coincide with one of the greatest downturns in the housing market this country has ever seen.• It will be years before all this sawtimber will find its way to the market.mccrawenergy.com
  17. 17. Present state of things• Industrial landowners (TIMOs & REITs)are not helping the situation as most have lowered planting densities . Some have lowered densities to 218 stems/acre.• Many are now planting CMP and SE seedlings. These high priced, low density seedlings are being grown for the sawtimber market.• Tree improvement programs have focused on selecting trees for the production of sawtimber.mccrawenergy.com
  18. 18. mccrawenergy.com
  19. 19. Present state of things• Additional dangers to forest plantation acreage may be in our current commodity pricing. With corn and cotton at all time highs we may see acreage revert from timberland back to farm land.• Keep in mind that there is no such thing as marginal farmland. Marginal farmland in the South is called timberland.mccrawenergy.com
  20. 20. Present state of things “The reports of my death are greatly exaggerated.” Mark Twain• This can also be said about the pulp/paper industry in the South.• Freesheet (fine papers) have declined. Closure of the Franklin VA mill.• Linerboard appears to be holding its own.• Pulp is the golden boy at present. Franklin mill to reopen in 2012 producing fluff pulp.mccrawenergy.com
  21. 21. US South Daily Pulp/Paper Mill Wood Usage 80,000 70,000 60,000 50,000 Tons/Day 40,000 1991 2002 2009 30,000 20,000 10,000 0 AL AR FL GA KY LA MS NC OK SC TN TX VA StateSouthern Pulpwood Production 1991, 2002, 2009. US Forest Service, Southern Research Station mccrawenergy.com
  22. 22. mccrawenergy.com
  23. 23. Recent Pulp PricingDissolving pulp prices on world markets haveskyrocketed from protracted lows of $300 to$500 per ton from the 1970s into the late 1990sto as high as $1,800 to $1,900 currently, withspot prices up to $2,500 per ton and higherearlier this year. Market drivers have been inand out of gear in recent monthsbut, overall, most observers see the dissolvingpulp boom continuing for at least several moreyears.The Dissolving Pulp Gold Rush, Paper 360, September/October 2011 mccrawenergy.com
  24. 24. Present state of things• At this level of pricing, pulp mills are making more than $300/ton.• Typically a mill uses around four tons of greenwood to produce a ton of pulp.• Based on this ratio, a pulp mill could currently pay an additional $75/ton for wood before they run into the red.• Energy users can not pay these prices for wood.mccrawenergy.com
  25. 25. Present state of things• In recent months I have received feedback from several sources on the FIA numbers.• These numbers are being used to make major investment decisions on energy projects.• There are questions related to inventory, removals and volumes.• The issue of Florida timber harvest levels has been examined by John Morris VP at Foley Timberlands.mccrawenergy.com
  26. 26. CHART 4 SOURCE: F&W Forestry Services (2007)mccrawenergy.com
  27. 27. Southern Forest Research Station, Forest Inventory & Analysis, The Inventory, September 2011mccrawenergy.com
  28. 28. What does the future hold?Here are some possible scenarios;• Southern pine plantations will be heavily stocked with sawtimber.• The specifications that differentiate pulpwood from small sawtimber will probably change with the smallest of this sawtimber moving into pulpwood.• This will result in landowners wanting increased pricing for pulpwood and downward pricing pressure on small sawtimber. There have been recent incidences of spot markets paying more for pulpwood than for small sawtimber.mccrawenergy.com
  29. 29. 45 South-wide Pine Stumpage Prices 40 35 30 Sawtimber 25 Chip-N-Saw$/ton Pulpwood Expon. (Sawtimber) 20 Expon. (Chip-N-Saw) Expon. (Pulpwood) 15 10 5 0 2006 2007 2008 2009 2010 2011 Source: Timber Mart South mccrawenergy.com
  30. 30. What does the future hold?• The volumes of forest residue will increase as we all know that larger trees have larger limbs and tops. Also, the current push to low planting densities will increase the amount of residue hardwood that invades these pine stands. These are both pluses for users of forest residue.• With the continued glut of sawtimber on the market, there are many in the forest products industry who feel that we may see increased sales of timberlands by the TIMOs and REITs in an effort to prop up returns within these organizations.mccrawenergy.com
  31. 31. Summary• The reduction in pine pulpwood inventories will impact all users, the existing pulp/paper industry and the new energy start-ups.• Forest Landowners will have opportunities to “cash-in” on these reduced inventories. This will include the use of higher planting densities and intensive forest management.• Users of pine pulpwood can be proactive and begin to plan for the feedstock markets changes or wait and pay the price.• This situation will be a plus for users of forest residue.mccrawenergy.com
  32. 32. Questionsmccrawenergy.com

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