-- Wood machinery firm Ex-Factory, Inc. announced a wood pellet equipment joint venture with a unit of energy giant PGI Energy, Inc. (Pink Sheets:PGIE). The two will develop and sell equipment for generating energy from wood pellets.

Under the agreement, Charlotte, NC-based Ex-Factory, Inc., which sells reconditioned and new wood manufacturing equipment - some of it reconditioned in its plant in Zeeland, MI - becomes exclusive North American distributor of the Teccon Pellet Tower, a product developed by PGI's Green E & P, Inc. joint venture subsidiary.

Juergen Schumacher, Ex-Factory, Inc. owner, forecasts that pellet and briquette fuels made from sustainably produced biomass and torrified biomass will play a very noticeable and high impact role in reducing U.S. demand for fossil fuels.

PGI wants to cash in on the growing worldwide market for high quality wood pellets and bio coal briquettes as renewable energy sources. Ex-Factory says the partnership combines its wood and biomass processing expertise with the project financing, logistics, and trading arms of PGI to develop manufacturing facilities and bring product to market. 

PGI Green E & P, Inc. has been working in other alternative fuel sources, including tires to light fuel oil, plastics to crude, pelletizing, and  converting municipal waste to synthetic gas. It expects to trade pellets and briquettes through commodities trading or directly through a sister firm PGI Energy Trading, Inc.

The announcement by Germany last week that it would abandon nuclear power for greener alternatives heightens the demands for wood as fuel capacity. Last month the world's largest wood pellet plant for bio-fuel purposes was opened in Waycross, GA by German energy giant RWE. The company is exporting 750,000 tons of monthly output to Europe for converting coal-fired a mixture of wood-based biofuel.

For the wood products industry, this will increase pricing pressures for raw material used in wood panel manufacture such as MDF. Already global economic recovery had begun to create upward pressure on wood fiber pricing last year.

High demand for wood raw-material by the pulp industry pushed the costs for wood fiber upward in the second half 2010, says analyst Wood Resource Quarterly, with softwood chips and softwood pulplog prices higher in most key markets around the world by the fourth quarter of 2010. The company says its Softwood Wood Fiber Price Index increased for the third consecutive quarter  to $103.60/odmt (oven dry metric ton), the highest level since the beginning of the financial crisis, and now 16 percent above the first quarter 2009 prices. The biggest price increases occurred in the U.S. Northwest, Sweden, Spain and Brazil.

Ex-Factory, Inc. says deployment of the highly efficient Pellet.Tower for production of premium wood pellets for fuel is the initial focus of its joint venture with PGI Energy, and expects to move into high quality processing equipment in pellet and briquette manufacturing.