Nanocrystalline Cellulose: Is Wood Going To Be The New Plastic? (SNE, IBM, CUT, WOOD)

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October 1, 2012 10:15am NASDAQ:WOOD NYSE:CUT

I can remember a few years back when my grandmother was shopping for a new television. She searched through countless catalogues and was upset when she couldn’t find a TV that was “elegantly” fitted into a wooden box. It took her months to finally realize that no one produced wooden

box television sets anymore – much less anything other than flat screens. She finally caved in and bought a nice Sony (NYSE:SNE).

And you’ll be happy to know that, to date, she still hates her new television…

Wood mixed with electronics was thought to be a decorative combination of the past. But soon, a wood by-product could be used in all types of modern electronic devices.

In fact, The U.S. National Science Foundation has predicted that this organic super-material will become a $600-billion industry within the next eight years.

So here’s what investors need to know…

The Future of Wood Pulp

This new wood by-product, simply known as wood pulp, could actually make up key components in your electronics in the near future.

Many are hailing wood pulp, scientifically know as nanocrystalline cellulose (NCC), as the next big wonder material.

Wood pulp is a transparent material made from a tightly packed collection of needle-like crystals. Its production begins with purified wood, where unneeded compounds are removed.

The wood is then milled into a pulp and further impurities are chemically removed. Next the pulp is separated and concentrated as crystals and turned into a thick paste. Being dense, hard and tough, the product can be molded into different shapes and sizes.

The paste can be applied to surfaces as a laminate, or turned into strands like nanotubes. And when freeze-dried, the material is lightweight, absorbent and a good insulator.

The tightly packed crystals are so strong they have a strength-to-weight ratio that’s better than stainless steel.

The reason it took this long to be able to process wood pulp is because technology, like electron scanning microscopes, only came to market in the last decade.

But producers are becoming more efficient and believe NCC will be sold for just several dollars an ounce as early as a couple of years from now.

Now you can understand the hype.

Technology companies will be able to utilize an extremely cheap product that also happens to be environmentally friendly.

Taking it to Market

The world’s first wood pulp facility was opened in Montreal, Canada, at the end of 2011. This CelluForce facility is already producing a metric ton of wood pulp per day.

With demand ramping up, the first NCC factory in the United States was opened in Madison, Wisconsin this year.

The U.S. Forest Service owns the $1.7-million plant that’s now the second pilot plant in the world. The new plant will produce two types of NCC, crystals and fibrils.

Wood is abundant in the areas around both plants, and to produce wood pulp you don’t even use the whole tree. Manufacturers could also take branches, twigs, or sawdust to create the material. What some consider waste, NCC producers can turn into profits.

A Potential Multi-Billion-Dollar Industry

As I mentioned before, The U.S. National Science Foundation recently predicted that wood pulp will become a $600-billion industry by 2020.

Already, Japanese company Pioneer Electronics (OTC: PNCOF), (TKO:6773) is applying wood pulp in the next generation of flexible electronic displays.

The U.S. Army is using the material to make ballistic glass and lightweight body armor.

And International Business Machines (NYSE:IBM) is using it to create components inside computers.

The variety of applications for wood pulp is seemingly endless.

Wood pulp could replace metal and plastic in many goods and materials – even car parts.

One day in the distant future, we could even see non-organic plastics become obsolete.

Investors should keep an eye on the development of wood pulp. It’s not often that an abundant, renewable resource has such implications to change the products and technology we use on a daily basis.

With the potential to become a multi-billion-dollar industry by the end of the decade, we will certainly continue to monitor its development at Investment U.

Good Investing,

by Ryan Fitzwater, Investment U Research

Related: Guggenheim Timber (NYSEArca:CUT), iShares S&P Global Timber & Forestry Idx (NASDAQ:WOOD)

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