Wood pellets in Sweden

AN ANALYSIS OF WOOD PELLETS
FOR EXPORT: A CASE STUDY OF
SWEDEN AS AN IMPORTER
P.B. ARUNA JAN G. LAARMAN
PHIL ARAMAN FREDERICK W. CUBBAGE

A BSTRACT

North America is a major producer of wood pellets, and the principal market for them is domestic residential wood heating. To date, the export market for wood pellets is small. On the other hand, several developments are occurring that maybe increasing the foreign demand for biomass fuels. A few North American companies are considering Sweden as a potential export market for wood pellets. Sweden heavily taxes fossil fuels, and plans to phase out nuclear power in the near future. This in addition to various other factors explains Sweden's use of wood pellets as an energy source. This paper briefly reviews the prospects and constraints for this international trade in wood pellets. Many factors favor North American exports, although an important constraint is that the United States does 

Noorth America is a major producer of wood pellets. Most wood pellets are produced from sawdust and wood shavings as a by-product of wood manufacturing. The majority of pellet manufacturers undertake pellet production as an "addon" to an existing forest products business (primary or secondary processing), agribusiness, or municipal solid waste disposal company. This reduces the volume of waste and earns at least some income from the pellets.

Pellet sales in the United States were 571,000 tons for the 1994-95 heating season, an increase of one-third over the preceding year. Most pellet production is sold in the U.S. domestic energy market for residential heating. However, exports may be attractive when the price-cost structure is favorable, and when producers can access reliable streams of "waste wood" (e. g., used pallets too costly to repair and recycle).

In Canada, a number of pellet manufacturing units are being established because new regulations prohibit wood waste disposal in landfills and other municipal dumps. The regional trade in wood pellets between Canada and the United States is affected by these regulations. Specifically, the prospect of pellet over-supply in some subregions explains why Canadian producers are considering exports to countries besides the United States.

At least in principle, North American exporters of wood pellets should be studying market prospects in Europe. In recent years, the European Community has taken several steps to reduce trade barriers both internally and with the external world. Moreover, a number of European countries are undertaking projects in renewable energy with funding from the European Union. Also, the European Community is opening new trade and investment relationships with Russia, with Germany and its newly acquired eastern sector, and with Asia.