The global wood chips market is estimated to register a significant CAGR during the forecast period owing to surging demand for renewable energy generation sources. Also, the growing use of the product for residential heating solutions, primarily in Europe and North America, is expected to stimulate the growth of the market.
Rising demand for thermal energy generation using renewable and green feedstock materials is likely to work in favor of the market. Wood chips exhibit a superior energy coefficient, which is poised to keep their demand high during the forecast period.
However, the industry is facing stiff competition from wood pellets, which are extensively commercialized as an alternative to these chips. High penetration of pellets in power generation in the residential and commercial sectors can hamper the growth of the market over the forecast period.
The abundance of raw materials for the production of chips across Europe, North America, and the Asia Pacific is projected to result in a decrease in the overall manufacturing cost. Also, the growing prominence of sustainable production processes about wood cultivation and processing is estimated to stimulate the growth of the market.
West Africa accounts for a sizeable production share in the market due to high plantations coupled with the presence of a well-established manufacturing base. A large part of the demand for wood chips in Europe is met through imports from Africa due to low production levels.
The presence of stringent regulatory frameworks in Europe and North America is expected to fuel the demand for wood chips. Increasing awareness among consumers regarding the usage of these products in home heating solutions is likely to spur the growth of the industry.
In terms of product, wood chips are commonly available in the form of softwood and hardwood. Soaring demand for the product as garden mulch and other applications such as playground surfacing is poised to drive the market during the forecast period. The high carbon content of hardwood-based products is poised to stir up its demand during the forecast period.
Based on the application, the global wood chips market can be divided into combined heat and power (CHP), household furnishing, residential heating, and others. The demand for the product as fuel in CHP applications is anticipated to experience noteworthy growth over the coming years.
Residential heating is one of the prominent applications of the product, though the penetration is estimated to be limited by extensive use of pellets for interior heating. Superior water-absorbing characteristics coupled with low product prices are expected to encourage the use of wood chips as garden mulch.
Rising demand for these chips in the commercial energy generation industry in economies of Asia Pacific, including China and Japan, is providing an upthrust to the regional market. The presence of GHG emission thresholds in developing economies coupled with the introduction of prerequisite limits in the Renewable Energy Directive 2 (RED 2) is likely to benefit the growth of the overall market. Besides, Japan’s Feed-In-Tariff scheme, which provides subsidies to the usage of biomass, is supporting the growth of the industry in APAC.
The demand for the product in Central & South America and the Middle East is poised to remain moderate due to the increasing reliance of consumers on conventional energy sources. Besides this, lack of the use of the product for residential heating in the Middle East is projected to limit the growth of the market in the region
The market has been a witness to extensive price volatility on account of change in raw material cost, influenced by weather conditions, and changing regulatory norms governing wood cultivation.
Key players in the global wood chips market are focusing on capacity expansions to meet the spiraling demand for the product. Oji Holdings announced its plans for the establishment of a woodchip processing company in Japan, which is aimed to provide raw materials required for the company’s biomass power plant. Some of the prominent companies operating in the market are Orsted, Mitsui & Company, and Sojitz.
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