Wood pellets market in Chile

Chile has unique natural vegetation which extends from east to west and from north to south. In the light of its exotic plantations, Chile began to plant a new type of forest in the last century, which comprises today’s forestry sector in this country. With its geographic characteristics and rich forest resources, wood pellets making is becoming more and more popular.


Country Description
Chile is a tri-continental country that has territory in South America, Antarctic and Oceania. Being situated in south-east part of South America, Chile is located between 17°30’S and 56°30’S. Being a long and narrow country with a length of 4300 km and an width of 170 km, Chile borders with Peru to the north, Argentina and Bolivia to the east, the South Pole to the south, and the Pacific Ocean to the west. Population of Chile approximates 17.4 million inhabitants in 2012.
Forest Resources
Forestry is one of the main economic sectors in Chile, its production value occupies 3.3% of gross domestic product, which is also the second largest export sector behind copper mining. Forest coverage rate of Chile is 22% with 16.2 million km2 forests. Administratively, it is divided into 15 regions.
1. Natural forests (13.6 million hectares) mainly located in the 3 large regions of south part: 9 , 10 and 12 regions, which together represent 75% of the national natural forest area. Endemic species is the major part comprised of natural forests that lied in mountainous regions, especially in the Andes Mountains.
2. Planted forests(2.3 million hectares) primarily distributed in the 3 large regions of the central-south part: 8, 9 and 7 regions with latitude between 34º and 41°S, which also accounted for 75% of national planted forest area. Among planted forests, radiata pine represents 64%, eucalyptus globulus and eucalyptus nitens accounts for 28%, all these 3 species comprised of over 90% of planted forests. According to the predominant species and its geographic location, natural forests have been fallen in 12 forest types which contain palm forests, Araucaria forests, Roble-Hualo forests and Schlerophyllus forests.
Total plantation area increases form 1.7 million hectares in 1990 to 2.4 million in 2010 for the fast development of forest plantations. Among the forests, only 25% of forest area are owned by the state and majority are privately possessed. 46% of forest are production forest, 29% are designed to protect soil and water.


Forest Production Status
According to the 2014 State of the World’s Forest report, in 2011, 1% of total labor force -- 85,000 people were employed in the formal forest sector which spread across round wood production, wood processing and pulp paper. While over 10% of total labor force--841,000 were employed in the informal forest sector.
This report also shows that forest sector contributes 3.3% to its GDP. Among this, pulp and paper’s contribution to the total forest sector is about 53%, while wood processing is 27% and round wood production is almost 20%.
As to foreign trade, in 2012 forestry sector exported $ 5.389 billion in goods, which was also the top five that represents 51.7% of total exports. The top 5 largest trading partners of forest products for Chile are China, EU, Japan, Netherlands and South Korea.
Reasons to Make Wood Pellets
Wood pellets are a fuel made by drying and pressing the sawdust that is generated from wood processing factory. Wood pellets can be used to replace fossil fuels and wood because it generate less exhaust and is more environmentally friendly. Wood is usually adopted for heating, however the smoke produced may cause serious pollution problem. Besides, wood pellet is made from wood scrap which can make effective use of the local rich forest resources. Moreover the soaring international price of crude oil is also one significant concern to take into consideration.


Challenges of Chile’s Wood Pellets Market
1.One challenges existed in Chile’s wood is their small domestic market. People in Chile usually depends on firewood for heating, so the ideal solution to provide cleaner heat is one stove. However stoves are very expensive, besides there are no subsides for stoves or pellets, so it is hard to compete with firewood.
2.As Chile faces Pacific, and it is a long travel distance to reach European markets, coupled with old port facilities make it is unfavorable for pellets exporting.
3.Although amount of sawdust is huge because Chile produces almost 40m cubic meters of industrial round wood and 16m cubic meters of firewood, these residues are largely used to generate power and heat. Besides, paper and pulp sector owned large part of forest resources, they still want to produce electricity and do not have much desire for wood pellets making.
Regulations to formalize Chile’s wood pellets market
As wood burning produces high concernation of particulate matter (PM) and Chile has high depend on woods to provide energy, Chilean government set air quality standards to purify air. Besides, Chile also spread its air quality regulatory program over some organization units. Similar to the United States Environmental Protection Agency, CONAMA is the major head of the environment with mission to protect citizen rights to live in an unspoiled environment and to preserve nature. Chilean government encourages a more sustainable way of using wood for energy. Native forests are protected by law 84 and government also planning to issue new laws to regulate the use of firewood. In cities some proposals to limit emissions from residential firewood with decontamination plans are under review now.


Wood Pellets Export
Considering the low shipping rates and the fact that transport cost of pellets per unit energy is cheaper than liquid bio fuels, Chile would become an important wood pellets exporter. In 2007, Chile produced 60,000 tonnes of wood pellets and exported 20,000 tonnes. In South America the major import country is Chile and Brazil. Wood pellets import volume of China in 2012 has reached 76,000 tons.