A contract signed today with a Japanese company will boost exports of wood fuel pellets from B.C. by 5%, says Premier John Horgan.
There’s some question, however, whether there will be enough wood waste to meet the increased production, if sawmills in B.C. continue to shut down.
Secondary processors like pulp mills and wood pellet producers rely on wood waste from sawmills, which have been falling like dominoes in B.C.
On Thursday, October 17, Pinnacle Renewable Energy (TSX:PL) signed a contract to supply Mitsui & Co. with 100,000 tonnes of wood pellets annually. Mitsui will burn the wood pellets in a new thermal power plant in Japan.
“Innovative companies like Pinnacle signing significant deals with companies as large as Mitsui mean that there’s a bright, bright future for forestry,” Horgan said.
The present isn’t so rosy, however. A lack of wood fibre put a serious dent in Pinnacle’s production and share value recently.
Pinnacle’s shares dropped 37% over a two-day period, from $10.75 per share on September 30 to $6.75 per share on October 2, after the company announced it would miss its guidance for 2019.
The company said sawmill closures had resulted in intermittent supply of wood waste, as well as higher costs. As a result, its production of wood pellets was down 14% in the third quarter compared to Q3 2018.
“While the sawmill curtailments have been impactful to the business, we have fibre for continuous operation of our facilities to meet our contracted customer commitments,” Pinnacle CEO Rob McCurdy said in a press release.
Jim Girvan, a forestry consultant, has estimated that 13 sawmills will need to close in B.C, due to a long-term decline in the annual allowable cut. So far, four sawmills have shut down, which means there could be another nine sawmills yet to go.
Since sawmills provide pulp mills and other secondary producers, like wood pellet makers, with wood waste, there are fears that that is the next segment of B.C.’s forestry sector that could be hit with curtailments or closures.