Wood Chips Prices Explained

The rising demand for eco-friendly, renewable energy sources and sustainable materials pushes wood chip price fluctuation.

The rapid urbanization and investment of renewable energy in the Asia-Pacific and Latin America boost commodity prices as these countries adopt biomass power solutions, develop residential heating infrastructure, and improve landscaping projects.

Increased application of the product for domestic heating solutions in Europe and North America continues to drive the marketability of wood chips in these regions. Also, the depletion of traditional energy sources promotes the demand for this commodity as countries intensify the use of renewable energy sources, such as biomass.

On the supply side, the market’s availability and fluidity largely depend on the limitations implemented by sustainability-related certifications of greenhouse gas emissions from wood chips when used for energy generation.

Why are wood chips prices fluctuating?

1. Biomass Fuel

The heat and power segment provides a significant contribution to the global wood chips market (around 30%-35%). This commodity is used as a renewable energy source for combined heat and power plants (CHP), generating electricity and heat.

This application is common in residential heating and particularly popular in Europe and North America as these regions aim for sustainable energy solutions. With a compound annual growth rate of 5.8% and 7.79% respectively, these sectors drive wood chips price fluctuation globally.

2. Sustainable Construction and Landscaping

Wood chip’s biodegradability and ability to enrich soil health found extensive application in landscaping and composting. The commodity is ideal for residential and commercial landscaping as it’s good at moisture retention, weed control, and erosion prevention.

The rising use of eco-friendly insulation material translated to 25%-30% of its global market share. The United States and Canada largely use this commodity because of its affordability and versatility in garden projects.

3. Competition from Wood Pellets

While wood chips established their market, the commodity is constantly challenged with alternatives. Wood pellets offer higher energy efficiency and easier handling in power generation.

Several power generation companies prefer wood pellets because of their uniformity and higher energy density. Drax Power Station (UK), RWE AG (Germany), and Enel Green Power (Italy) integrated wood pellets into their renewable energy portfolios. This varied application provides a profitable segmented market in the wood industry.

4. Environmental Regulations on Emissions

Despite being a renewable source, burning wood chips generates carbon emissions. Major market consumers like the European Union follow stricter emission regulations, potentially limiting the use of wood chips.

As a result, manufacturers need to invest in pollution control equipment and adopt more sustainable practices to comply with the regulations. In turn, this leads to higher wood chip prices because of elevated production costs, making them less competitive compared to other biomass materials like wood pellets.

Which variables impact the price of wood chips?

• Biomass Fuel
• Sustainable Construction and Landscaping
• Competition from Wood Pellets
• Environmental Regulations on Emissions
• Sustainability and Environmental Certifications

Where do wood chips come from?

Wood chips are produced as a byproduct of the lumber and paper industries. Initially, they were created to utilize the leftover wood pieces and sawdust generated during the logging and milling processes.

As the demand for wood pulp in the paper industry grew, a more efficient and cost-effective way to process timber was needed. This led to the development of wood chippers (machines designed to cut larger pieces of wood into smaller and uniform chips suitable for pulping and other applications).

The production process of wood chips involves several steps. First, raw materials like pulpwood, waste wood, and residual wood from agriculture, landscaping, logging, and sawmills are collected. These materials are fed into a wood chipper and cut into small, uniform pieces.

Disk chippers and drum chippers are one of the types of wood chippers each suited for specific types of wood and end-use applications. The wood chips are sorted and cleaned to remove metal contaminants, and stored for further processing or direct use.

The common types of wood used in wood chips include hardwoods such as oak, maple, and birch, as well as softwoods like pine, spruce, and fir. These woods are preferred for their availability, durability, and suitability for various applications.

The top producers of wood chips are the United States, Australia, Latvia, Germany, and Estonia. These countries have well-established forestry industries and advanced wood processing technologies, enabling them to produce large quantities of wood chips for various applications.

What are the uses of wood chips?

The use of wood chips expanded beyond the paper industry. These are the top 5 applications of this commodity.

1. Mulching – Wood chips are used as mulch in gardens and landscapes. As they decompose, they improve soil texture and fertility, creating a healthy environment for plant growth. However, keep wood chips a few inches away from plant stems to prevent nitrogen deficiency and disease.

2. Walkways and Pathways – They provide a natural, aesthetically pleasing surface that is easy to walk on and helps keep shoes clean on walkways and pathways. Wood chip pathways reduce soil erosion and create a weed-free environment.

3. Composting – Adding wood chips to compost piles enhances the composting process. They help balance the carbon-to-nitrogen ratio, improve aeration, and retain moisture in the compost pile. This results in faster decomposition and the production of high-quality compost for gardening and farming.

4. Soil Erosion Control – Wood chips prevent soil erosion on slopes and in areas prone to erosion. They help stabilize the soil, reduce runoff, and protect plant roots from being washed away by heavy rains. This makes them a valuable tool in conservation and land management practices.

5. Animal Bedding – They provide a comfortable and hygienic environment by absorbing moisture and waste, reducing odors, and preventing the growth of harmful bacteria in barns and stables. This helps maintain the health and well-being of livestock.

What is the future price of wood chips?

The demand for sustainable renewable energy sources is steadily increasing because of global efforts to reduce carbon emissions and combat climate change. Wood chips are important in this transition due to their versatility and renewable nature.

Sweden, Finland, and Germany are at the forefront of switching to biomass energy, using wood chips for renewable energy for heating and electricity generation. These countries utilize wood chips in combined heat and power (CHP) plants, contributing to carbon-neutral energy production.

Additionally, companies like IKEA and Arauco use wood chips in their green construction projects, promoting sustainability and reducing the environmental impact.

Moreover, nanocrystalline cellulose (NCC) from wood chips in next-generation flexible electronics is an ideal reinforcing agent in its composites, enhancing the strength and durability of electronic devices. This new application will further elevate wood chip prices in the coming years.

On the restraint side, stringent carbon emission regulations in the European Union challenge the wood chips market. EU’s strict policies to reduce carbon emissions require industries to adopt cleaner energy sources and reduce their reliance on biomass.

These regulations increase production costs for wood chip manufacturers as they need to invest in advanced pollution control technologies and sustainable practices. This can lead to higher prices for wood chips, affecting their competitiveness in the market.

Overall, the market is expected to reach $19.50 billion in 2030, with a tag of $459.60 per ton.