ECONOMICS OF PELLET PRODUCTION FOR EXPORT MARKET

Abstract

Due to its renewable, clean-burning and cost-stable for home heating, wood pellet is gaining popularity day by day throughout North America. The use of pellets in co-firing with coal enhanced its utilization suddenly in Europe. As a result, some countries in Europe are planning to import wood pellets from Africa, America or neighboring European countries due to the shortage of wood in long term basis. This study focuses on the pellet production in Canada and its export to Sweden or the Netherlands. The transport and supply logistics were analyzed. The results showed that the total production cost of pellets was US$46.8 per metric tonne and among which 4.5 US$/tonne was the capital investment. The transport and supply logistics cost estimated as US$ 96.1 or 89.1 per tonne for exporting to Sweden and the Netherlands, respectively. The internal rates of return for the two cases were estimated as 24 and 37%, respectively, with a plant life of 10 years and the payout periods of 4 and 3 years, respectively.