Pellet mills say prices support more spot trades

July 18, 2011, New York, NY – Higher prices
for industrial wood pellets in northwestern Europe are boosting interest in
spot sales and lifting forecasts for future pricing, according to U.S. pellet
mill operators. Low prices and tight margins last year made spot sales
difficult for U.S. exporters, but many mills say that the situation is
beginning to brighten.

Increased demand from the
Antwerp-Rotterdam-Amsterdam (ARA), Scandinavia, and UK markets so far in summer
2011 has kept prices buoyed around €127/tonne cif ARA for July. This is almost
€10/tonne higher on the year, according to Argus assessments. Delivered prices
into ARA in July 2010 dipped to €117/tonne and fell further to €115/tonne in
August, leaving little room for profits after freight costs.

The extra margin this year allows efficient
mills to capitalize on shorter-term sales opportunities, and 2012 interest is
building into forward curves, a major U.S. pellet producer says. Recent spot
deals for delivery later in 2011 have garnered prices closer to €130/tonne cif
ARA, and 2012 tonnage is selling in the mid- to low €130s/tonne, according to
the producer.