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

2. 2 Main thesis: primary study results Primary study results GENERAL INFORMATION

3. 3 2. Observations Supply Chain membersNumber of observations forest owner52 Forest management operator3 Supplier / dealer of biomass2 Manufacturer of bio-coal2 Manufacturer of bioenergy products other than bio-coal 3 Industrial consumer of bioenergy6 Technology and consulting for bioenergy sector 11 Other stakeholder7 Total86

4. 4 2. Theoretical framework Value Chain Support activities Biomass planning & procurement Macro environmental driving forecesMacro environmental restrictions Competitiveness Primary activities Inbound logisticsMarketingSupply chain and sales modelsOperationsPricing & services

5. 5 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

6. 6 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

7. 7 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

8. 8 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 7

9. 9 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

10. 10 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

11. 11 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

12. 12 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.

13. 13 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)

14. 14 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

15. 15 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)

16. 16 2. Interrelationship between support activities and primary activities

17. 17 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

18. 18 THANKS!