Example Analyses of the Wood Chips and Paperboard Manufacturing Industries as Biomass Markets.
This fact sheet provides a market analysis approach that can be used to analyze any of these potential markets for the sale of biomass raw materials. Two examples were selected for application of the market analysis: the wood chip industry and the paperboard industry
Market analysis is integral to understanding customers as well as the forces that shape competition in the markets. It is fundamental to developing competitive priorities and marketing strategies—generally expressed in terms of cost, quality, delivery (speed and reliability), and flexibility (features, variety, and mix)—that would successfully enable a company to break into new markets or increase its share in its existing markets .
Porter’s Five Forces Model is a comprehensive yet easy-to-use market analysis tool that helps companies gain understanding of their industry’s customers. It is based on five forces that shape industry competition, shown in Figure 1 and briefly described accordingly.
The configuration of the five forces differs by industry. In this fact sheet, the U.S. wood chip and paperboard manufacturing industries are used as illustrative examples for the Porter Five Forces analysis, highlighting opportunities and challenges for biomass growers competing in the supply market of these industries. Because biomass is the input material supplying these two industries, supplier bargaining power is the most relevant force for biomass producers in the Porter model.
Wood-fiber raw materials for wood-chip processing facilities come from four primary sources:
Quality affects the suitability of these wood-chip end products for different applications in a suite of markets that includes landscape mulches, fuel for wood-fired boilers, pulp and paper, fiberboard, wood pellets, and biofuels, to name a few. A classification guideline for wood-chip end products is provided by the Biomass Energy Resource Center (BERC)  :
Other factors influencing selection of raw material sources and suppliers may include price, availability, and services. A key cost factor is the transportation distance from wood source to customer facility. Once selected, wood-chip facilities generally procure wood fibers from the suppliers under long-term contracts. Market forces for the U.S. wood chip industry are summarized in Figure 2. Some of the factors depend on scale.
Paperboard is made from fibrous materials that come mainly from two sources— virgin sources (mainly wood pulp), and recovered fibers (also known as secondary fiber, recovered paper and board, and recycled paper products), notably old corrugated containers. Non-wood fiber is currently used to a smaller extent. Five influential factors in choosing the types of fibers used for paperboard production are:
Figure 3 exhibits the configuration of the five forces in the paperboard industry. From the biomass growers’ perspective, a number of insights into customers’ characteristics and needs are noted. According to the FAO annual survey of world pulp and paper capacities, only about 16 percent of the wood pulp produced in the United States was sold on the market as pulp during 2012–2014, suggesting that the majority of pulp produced for paper and paperboard is made by integrated mills for their own operations. The growth prospects for the major product line discussed earlier and the practice of in-house pulp production render the paperboard-manufacturing market favorable as an opportunity for biomass growers to supply fiber raw material.
Based on the example of the U.S. paperboard-manufacturing industry, several characteristics of this industry make it promising for biomass producers as suppliers. The supplier input is critical, yet the industry has the technology to extract wood pulp from a variety of sources, allowing the biomass industry to emerge as a natural alternative for paperboard manufacturing. Nevertheless, the industry has operated using other sources in the past and is likely to continue to do so until the biomass cost becomes competitive with traditional sources and can provide the raw material reliably.
As for the U.S. wood-chip industry example, the industry appears to be a promising customer market for biomass producers as suppliers. The supplier input is critical and the industry continues to expand, pushing the demand for raw materials, which, in turn, increases the prices of raw materials provided by traditional suppliers. In the future, biomass producers may be able to position their material as a competitive alternative to these traditional suppliers, provided the yields are high and the cost becomes competitive with the traditional sources.
Two industries were analyzed in this fact sheet, but this framework can be applied to any industry market. Its use can provide biomass growers a useful guide for the feasibility of entering markets through understanding buyers’ characteristics and needs, the balance of buyers vs. grower powers, and the competitiveness of growers against other suppliers. Information necessary for the analysis can be based on the biomass growers’ knowledge of the specific markets, industry reports, or government publications.
An overview of all biomass markets can be found in the NEWBio whitepaper publication entitled, Market Opportunities for Lignocelluosic Biomass: Multi-tier Market Identification Framework. This white paper provides data for industry and companies collated from various sources, including Penn State business library databases (e.g. IBISWorld, Hoover’s, and Standard & Poor’s NetAdvantage), academic and industrial business journal databases (e.g. ABI/INFORM Complete, Academic Search Complete [Ebsco]), industry association publications, and government publications, as well as company websites, blogs, and annual reports.
This Fact Sheet is a NEWBio Project Resource, which provide information on the research, opportunities and challenges in developing a sustainable system for the thermochemical production of biofuels from perennial grasses grown on land marginal for row crop production.
 Thomchick, Evelyn, and Kusumal Ruamsook. 2014. “Market Opportunities for Lignocellulosic Biomass: Multi-tier Market Identification Framework.” NEWBio White Paper.
 Chi, Ting, Peter P. D. Kilduff, and Vidyaranya B. Gargeya. 2009. “Alignment between Business Environment Characteristics, Competitive Priorities, Supply Chain Structures, and Firm Business Performance.” International Journal of Productivity and Performance Management 58 (7): 645–69. Sarmiento, R., G. Knowles, and M. Byrne. 2008. “Strategic Consensus on Manufacturing Competitive Priorities: A New Methodology and Proposals for Research.” Journal of Manufacturing Technology Management 19 (7): 830–43.
 BERC – Biomass Energy Resource Center. 2011. “Woodchip Heating Fuel Specifications in the Northeastern United States.” The Biomass Energy Resource Center.
 EPA – US Environmental Protection Agency. 2012. “Paper Making and Recycling.” US Environmental Protection Agency, November 14. Hoopes, Stephen. 2014a. “Paperboard Mills in the US.” IBISWorld Industry Report 32213, June.
 Bajpai, Pratima. 2012. “Chapter 2: Brief Description of the Pulp and Paper Making Process.” In Biotechnology for Pulp and Paper Processing, Springer Science+Business Media, LLC, 7–14. Hoover’s. 2014. “Pulp & Paper Mills.” First Research Industry Report. Iggesund Paperboard. 2014. “The Paperboard Process.” Product Information, 2014-08-26. Singh, Pooja, Othman Sulaiman, Rokiah Hashim, Leh Cheu Peng, and Rajeev Pratap Singh. 2013. “Using Biomass Residues from Oil Palm Industry as a Raw Material for Pulp and Paper Industry: Potential Benefits and Threat to the Environment.” Environment, Development and Sustainability 15 (2): 367–383.
 National Council for Air and Stream Improvement. 2013. “Effects of Nonwood Fiber Use.” http://www.paperenvironment.org/PDF/nonwood/NWF_Full_Text.pdf
 FAO – Food and Agriculture Organization of the United Nations. 2013. The 2013 FAO Survey of World Pulp and Paper Capacities, 2012–2017. FAO – Food and Agriculture Organization of the United Nations. 2014. The 2014 FAO Survey of World Pulp and Paper Capacities, 2013–2018.
 Thomchick, Evelyn, and Kusumal Ruamsook. 2015. “Market Opportunities for Lignocellulosic Biomass: Analysis of the Paperboard Industry.” NEWBio White Paper.
The Northeast Woody/Warm-season Biomass Consortium - NEWBio is supported by Agriculture and Food Research Initiative Competitive Grant no. 2012-68005-19703 from the USDA National Institute of Food and Agriculture.
Led by Penn State University, NEWBio includes partners from Cornell University, SUNY College of Environmental Science and Forestry, West Virginia University, Delaware State University, Ohio State University, Rutgers University, falseUSDA’s Eastern Regional Research Center, and DOE’s Oak Ridge National Laboratory and Idaho National Laboratory.