Global pellet market study

May 26, 2011, London, UK – Biomass pellet
markets have shown strong growth in recent years, with a total market volume of
around 16 million tonnes in 2010. With the expected policy framework, Pöyry
expects the global consumption of biomass pellets to nearly treble to 46
million tonnes by 2020, reflecting an annual growth rate of roughly 11%.
Consolidation of the currently fragmented market is likely to occur, with a
trend towards larger individual project capacities to gain from economies of
scale. Market transparency and supply security are currently lacking; their
future development will help pave the way for the commoditization of biomass
pellets.

These changes will create opportunities for
producers in cost-competitive regions but will also present challenges for
established players. Pöyry’s second edition of the Global Pellet Multi-Client
study, published April 2011, aims to remain the benchmark publication for
information and insight into the global production and trade of pellets.

Bioenergy projects in Europe are making
steady progress and an increasing number of fossil fuel plants are being
retrofitted throughout Europe to use biomass. South Korea and Japan have
concrete initiatives in the pipeline to increase their use of biomass for
energy generation, and China is developing bioenergy generation capacity at an
impressive rate. A constantly changing political landscape leading to a wide
range of incentives and regulations affects countries disparately and often adds
a high level of uncertainty to the market, which in combination with the
difficult financing environment and the global economic downturn, has affected
the completion of announced pellet plant projects.

Consequently, Pöyry thinks that a new
expanded and revised edition of the Pellet Multi-Client report, first published
in 2009, is needed to reflect current developments in the pellet market
landscape, as well as to analyse how key drivers will influence the market
going forward. Andreas Teir, who leads Pöyry’s global bioenergy practice,
explains, “The rapid development in the pellet sector has been largely driven
by bioenergy incentive schemes in a number of European countries, the
availability of cheap biomass as raw material, and the cost of transport. We
expect significant further growth and increasing international trade of pellets
to level regional supply and demand imbalances.”

The updated report provides a longer-term
market outlook up to 2020. In addition to up-to-date market information for more
than 30 countries across the globe, the report has been expanded to cover
topics such as the emerging use of agricultural feedstocks for pellet
production; the economics of production, shipping, and use of torrefied
pellets; new sustainability and greenhouse gas emission regulations; and an
overview of incentive schemes affecting wood pellet supply and demand
worldwide.

“Torrefied pellets hold good potential to
improve transport costs compared to wood chips and normal wood pellets.
Utilities may also benefit from better handling characteristics and further
improved combustion properties in relation to co-firing with coal. However, the
technology and its economics provide challenges for the effort to scale it up
to industrial scale, and we do not anticipate a high level of investment on the
short to medium term.” says London based Hannes Lechner, Head of Bioenergy NW
Europe, Pöyry Management Consulting.

For further information about the study and
business opportunities in the wood pellet market, please contact Hannes Lechner
(Hannes.Lechner@poyry.com).

www.poyry.com