Wood Pellet Market Heats Up
November 14, 2014 | 9:49 am CST
Viridis Energy Cuts Q1 Loss by 31.4%

Wood Pellet Market Heats UpWith the winter season under way the wood pellets market is heating up and several pellet manufacturers are making acquisitions and investment moves.

Much of the activity is due to the growing demand for wood pellets. Reports estimate that the market is expected to expand at a compounded annual growth rate of $21% from 2013 to 2020 (9.9 million metric tons per year to 38.0 million), as more sustainable fuel methods are sought.

Bethesda, MD-based Enviva Partners LP, backed by the equity group Riverstone/Carlyle, filed with the SEC to raise up to $100 million in an initial public offering, to help fund the construction of more plants. The company provides wood pellets to industrial customers and currently has five manufacturing facilities in the Southeast. And it has a capacity to produce approximately 1.7 million metric tons of woody biomass per year.

Also, earlier this year two investment firms announced plans to build wood pellet plants in Arkansas. Zilkha Biomass Energy is building a plant in Monticello, AR, and Highland Pellets LLC plans to build a plant in Pine Bluff, AR.

However, even as expansion plans abound not every company in the wood pellets market is building more facilities. Some view the current environment as a good time to sell. Ken Simard of Nature's Earth Pellets LLC, headquartered in West Palm Beach, FL, is one such player. "I also want to get closer to full retirement," he adds.

Simard currently has two wood pellet plants -- one in Reform, AL, and one in Laurenburg, NC, which is for sale. With a production capacity of 120,000 metric tons per (and room for expansion), it  is approximately 130,000 square feet with pelleting equipment and fully automated packaging lines, 2 Hamer 2080 HFFS baggers, 2 Kawasaki palletizing robots and msk pallet hooder.

Both plants produce a hardwood pine blend fuel pellet and 100% Southern yellow pine pellet.

With the surging interest in woody biomass, Simand's NC plant has been the subject of many suitors with some even announcing the purchase of the plant. But Simand says those investor announcements were premature because he is still searching for the right buyer.

Record Northeast Wood Pellet Demand

The increased demand for wood pellets from industrial customers and large chain retailers is reducing availability for individual consumers in the Northeast with some shortages actually being reported.

According to the Rutland Herald, a local supply store in New Hampshire alerted its customers that backlog orders from the wood pellet manufacturer would not only limit availability but increase the price as well. The paper goes on to report that the backlog is a problem with several manufacturers due to increased orders over the spring and summer and depleted inventories from last year's harsh winter.

"We're seeing an impressive demand for woody biomass for residential heating across the United States," said Joseph Seymour, Executive Director of the Biomass Thermal Energy Council (BTEC), in a statement. "Producers and retailers throughout the country are delivering the renewable fuel from regions with strong supply to regions with the highest demand. We're excited to see this pellet delivery network developing around the country, while the pellet fuels industry is further adjusting its output to meet this growing market."

Have something to say? Share your thoughts with us in the comments below.