Bio-coal market study: Value chain analysis of bio-coal business in Finland Lei Wang 06.06.2013.

Bio-coal market study: Value chain analysis of bio-coal

business in Finland

Lei Wang

06.06.201306.06.2013

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Main thesis: primary study results

Primary study results

GENERAL INFORMATION

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2. Observations Supply Chain members Number of

observations

forest owner 52

Forest management operator 3

Supplier / dealer of biomass 2

Manufacturer of bio-coal 2

Manufacturer of bioenergy products other than bio-coal

3

Industrial consumer of bioenergy 6

Technology and consulting for bioenergy sector

11

Other stakeholder 7

Total 86

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2. Theoretical framework

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H1: Political factors are critical in the Finnish biomass utilization.H2: Environmental factors are critical in the Finnish biomass utilization.H3: Technology should be one of the main challenges for the Finnish bio-coal

sector.H4: Cost-profit uncertainty should be one of the main challenges for the Finnish

bio-coal sector.H5: In the current Finnish bio-coal business, the competition is low.H6: Nature characteristics of biomass is an important factor to be considered in

the inbound logistics of bio-coal business.H7: The current Finnish bio-coal business should be focused on a decentralized

model at local level. H8: In the bio-coal VC, support activities and primary activities are interrelated.

2. Hypothesis

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political factors and environmental factors are the most effective

drivers in the biomass procurement decisions (the average mean

of these two sets are 4.2, and the average mean for economic and

environmental factors are 3.6) H1 & H2 supported

2. Biomass related issues

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2. Macro environmental driving forces and restrictions

the current Finnish bio-coal business is driven by a mixture of four factors:

profit + resource + customer + policy (23 respondents have choose this

mixture position). H3 & H4 supported

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2. Macro environmental driving forces and restrictions

Restrictions for the current Finnish bio-coal business Frequency

lack of advanced technology in production, transportation and utilization process 62

low or uncertain profitability 43

lack of innovations in production and application 32

competition due to already established markets for other wood based bioenergy products

32

lack of political support 28

high price of the end product 28

bad image reflecting from mineral coal and traditional charcoal 16

too many wood based bioenergy product options available 10

bio-coal production and transportation is viewed as more environmentally hazardous

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2. Competition

our respondents slightly agree more on the low competition environment in

the Finnish bio-coal sector (the average mean of this set is 3.6, and the

average mean for the high competition set is 3.0) H5supported

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2. Inbound logistics

physical characteristics of wood biomass and biomass logistic practices are

more important factors in the inbound logistics of bio-coal business (the

average mean of these two sets are above 3.5) than the “production related”

items (the average mean of this set is 3.0) H6 supported

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2. Supply chain models (current)

More than 50 respondents chosen these two models. Major characteristics of the current Finnish bio-

coal SC are:

1) Depend on local biomass resources;

2) Short biomass transportation distance or longer biomass transportation with additional terminals;

3) Focus on both industrial end-users and private end-users;

4) Prefer direct sales to industrial end-users;

5) Sales to private end-users through intermediaries. H7 supported

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2. Supply chain models (future)

54 respondents chosen this export model. Major characteristics of the future Finnish bio-coal SC are:

1) larger biomass inventory (whole country biomass resources);

2) biomass terminals are necessary elements;

3) large-scale production;

4) mainly for export markets.

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2. Marketing

respondents support more for broader products (mean of this variable is 4.2)

than the limited core product (mean of this variable is 2.1); and support more

for horizontal marketing structure (mean of this variable is 4) than the vertical

structure (mean of this variable is 2.8)

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2. Supply chain operations

The current weak parts of the SC are: production of bio-coal, marketing &

sales of bio-coal, and harvesting & collecting of biomass. H3 & H4

supported

Weak chains in the bio-coal supply chain

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2. Pricing

In order to lower the cost, significant changes should be made in the logistic

and production related operations. (average of these two sets are close to 4)

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2. Interrelationship between support activities and primary activities

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there are significant interrelationships between support and primary activities.

The clear implication here is to stress the importance of the “linkages”

between activities

we identified the effective drivers for the bio-coal business in Finland: political

and environmental factors are critical drivers; and technology and cost-profit

uncertainty are the major challenges.

this study defined a “low competition” in the current bio-coal business in

Finland, which implies possibilities of the market entrance for the Finnish and

international companies.

we identified the current Finnish bio-coal model is decentralized model at local

level, which means localized production of bio-coal based on localized

biomass supply and bio-energy demand.

1. Conclusion

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THANKS!