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Florida Energy Summit Dean Mc Craw
- 1. Woody Biomass Fact vs. Fiction Dean McCraw CF McCraw Energy LLC 10/26/2011 mccrawenergy.com
- 2. McCraw Energy LLC We 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 US mccrawenergy.com
- 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
- 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. “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 Crowds mccrawenergy.com
- 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 Association mccrawenergy.com
- 9. SHIPPING COST FROM THE SOUTHEAST ARE COMPETITIVE COMPARED TO MOST REGIONS DK/SW €20-€25 Bel/UK €30-€35 (Winter shipping challenge) Source: Poyry mccrawenergy.com
- 10. Southern Forest Research Station, Forest Inventory & Analysis, The Inventory, March 2009 mccrawenergy.com
- 11. mccrawenergy.com
- 12. Southern Seedling Planting all Owners & all States: 1925-2009 3,000,000 2,500,000 CRP Acres 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. 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. 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. 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. 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. 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. mccrawenergy.com
- 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. 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. 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 State Southern Pulpwood Production 1991, 2002, 2009. US Forest Service, Southern Research Station mccrawenergy.com
- 22. mccrawenergy.com
- 23. Recent Pulp Pricing Dissolving pulp prices on world markets have skyrocketed from protracted lows of $300 to $500 per ton from the 1970s into the late 1990s to as high as $1,800 to $1,900 currently, with spot prices up to $2,500 per ton and higher earlier this year. Market drivers have been in and out of gear in recent months but, overall, most observers see the dissolving pulp boom continuing for at least several more years. The Dissolving Pulp Gold Rush, Paper 360, September/October 2011 mccrawenergy.com
- 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. 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. CHART 4 SOURCE: F&W Forestry Services (2007) mccrawenergy.com
- 27. Southern Forest Research Station, Forest Inventory & Analysis, The Inventory, September 2011 mccrawenergy.com
- 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. 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. 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. 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
Hinweis der Redaktion
- A younger skinnier me.I was called garbage man, junk man and at times Fred SanfordI just referred to myself as the Rodney Dangerfield of the Woodlands Division.As noted in the article, Union Camp installed a new boiler that could burn wood, coal, natural gas and #6 fuel oil.While UC had a big company logging operation, 25 crews, our operation was not in our company harvesting division but in our Land Department. We were considered a land clearing operation , there to reduce our site prep cost.We competed with the price of coal. We had to be at ¼ the price of delivered coal. This was before the internet, but I still kept up with the delivered price of coal.We were really successful and saved the company considerable money on site prep and energy cost. However, in the Fall of 86 we had a worldwide energy market crash and oil dropped to $10/barrel. We could not compete with UC was not the only forest products company that invested in renewable energy operations. There were a number of other forest products with forest residue operations.
- This article appeared in the Savannah paper last year and shows the preposterous statements made about the energy market. I have heard Georgia referred to as the Saudi Arabia of pine trees. This type of hyping is coming from economic development folks and not foresters!
- The US South has the second lowest freight rates to Europe.We are outdone by Russia which is opening the world largest pellet mill this month. It will replace the mill in Wax as the worlds largest as this new mill will be capable of producing 1MM tons/year. There are two major issues with this plant. The first is what both Napoleon and Hitler learned the hard way. Operations in the Russia during the winter can be nearly impossible and the harbor is frozen over for at least four months a year.The second relates to what happened in 1986. Chernobyl. When the reactor melted down and exploded most of the radiation cloud moved North. The world did not know of Chernobyl until a few days after the incident when detectors at a Sweden Nuclear plant starting going off. Apparently the issue is not the radioactivity in the wood. It is low enough to not be an issue in the pellets but when the wood is burned the radioactivity is concentrated in the ash and then it becomes an issue. Recently the Italian government forced a recall of pellets sold in Italy for home use.
- Hardwood 7.49 x 1,000,000,000= 7,490,000,000/1000=7,490,000 x 20.0= 149,800,000 tonsPine 9.53 x 1,000,000,000=9,530,000,000/1000= 9,530,000 x 15.5= 147,715,000 tons
- I have written two articles this year asking this question.This one for Forest Landowner magazine and a second for Biomass magazine.The one in Forest Landowner was written from the perspective of what a forest landowner can do. The one in Biomass was written from the perspective of what a pine pulpwood user could do.
- Each of these spikes are the result of government intervention in the regeneration business.First one was the soil bank program.The second one is the CRP program in the late 80’s, which will be the main focus of my talk.The more recent one was in the late 90’s and early 2000’s. This one has not had as big an impact on the market since most of it was focused on longleaf and wildlife.The USFS handled all the data collection up until 1999. Since that time Steve Chapman with the GFC has handled the collection of this data.I provided data for the states on these numbers. GA and FL do a good job
- 39.4 tons/metric ton (2205 lbs) $ 7.85/bushel 10yr average is $3.68/bushel
- Steve Troxler NC Commissioner of Agriculture -Show a farmer how to make a profit and in just a couple of years he will produce his way out of it.
- If anyone would like more information on the pulp and paper industry I would encourage you to attend next year’s SESAF meeting in February on Jekyll Island. Dr. Richard Phillips, retired Senior VP of Research for IP and currently professor at NC State will be presenting an overview of the pulp/paper industry in the SE area. I heard Richard do this presentation at the Appalachian SAF meeting last year. It is one of the best presentations I have ever seen. He will cover specific mills and how they rank. He also compares mills in the South with worldwide competition and the effects of exchange rates on production.
- August 1998 St Joe closed.
- As I noted earlier about herds, this same article list 15 mills that are moving to increase production of dissolving pulp including one here in FL.
- Based on his analysis, John estimates that Florida plantations were overharvested in 2007 by 3.8 million tons. He further forecast that this number would increase in the future as regeneration acreage continues to decline. Adding increased usage from bioenergy and biofuels operations “will further negate sustainability.” John is not the only one to question FIA data. I was at the GASAF meeting last month, where a speaker noted issues with Georgia’s FIA data. I have a copy of a recent presentation on Georgia data that I would be willing to share with anyone who contacts me. With all the recent
- 50% pulpwood 40% CNS 10% Sawtimber Average2006 7.50 24.00 39.80 $17.332011 9.00 15.00 27.00 $13.20 24% drop