Predicting the future of pellet trade

May 13, 2010
May 13, 2010, London, UK – Wood pellets are underpinning the emergence of a new commodities business in biomass. The key driver is bioenergy, and Pöyry Forest Industry Consulting expects double-digit growth in pellet markets over the next five years. These are the main findings of the study Wood Pellets – The Bioenergy Feedstock Solution? Global market, players and trade to 2015, published by Pöyry, a global firm providing bioenergy and biomass procurement strategies.

The wood pellet market is immature, and the reliability of data on trade, prices, production capacity, and actual production varies considerably among countries. Pöyry hopes to establish an authoritative base of reliable data and analysis that can be used for strategic decision making by existing or prospective market participants.

Marek Guizot, UK head of forest and wood supply strategies, says, “Wood pellets have been identified as one of the fastest growing bioenergy feedstock markets and also one where it is challenging to obtain reliable information. Pöyry has therefore decided to provide what is probably the first comprehensive strategic review of the global wood pellet sector.”

The global wood pellet market is and will continue to be a growth area. The current and future demand for wood pellets is strongly driven by the world’s need to develop renewable forms of energy and reduce greenhouse gas emissions. Global demand for wood pellets reached nearly 12 million tonnes in 2008 and is worth approximately EUR 2 billion. Europe and North America accounted for 97% of global demand. The market has grown rapidly, with a compound annual growth rate (CAGR) of 27% in Europe and 17% in North America from 2005 to 2008. However, these growth rates will slow as markets mature. Pöyry predicts that by 2015, global pellet demand will almost double, reaching approximately 24 million tonnes, a CAGR of 10.5%.

Development of the European wood pellet market has been largely driven by political targets to increase renewable energy usage. Such policy will continue to play a critical role in the development of pellet markets in EU countries and is expected to become a similarly important driver in North America.

There are two main end-use segments: residential and industrial. The residential pellet business is local, with regional trade, whereas industrial pellets are traded globally. Future trade flows will include industrial pellet shipments from Australia, South America, and South Africa.

Increasing demand for pellets in Europe and the decrease in ocean freight costs in 2009 created new opportunities for producers to export pellets from the southeastern United States and, recently, Australia. However, prices for industrial pellets (which are considerably lower than those for residential pellets) have not risen greatly, and margins for many producers are under pressure because costs have risen for raw materials such as sawdust, woodchips, or in some cases, logs. Logistical costs remain a threat and are one reason for the recent closure of Dixie Pellets in the United States (550,000 tonnes/year capacity). An interesting development to watch will be torrefied pellets, which deliver significant logistical benefits compared to conventional wood pellets.

“Compared to other forms of biomass such as woodchips, the main advantage that wood pellets offer is the significantly higher energy content per unit of volume,” says Hannes Lechner, UK head of bioenergy. “This allows for greater transport efficiency over longer shipping distances, an advantage which could increase in importance as the sustainability or carbon footprint of such long distance trade routes comes under the spotlight.”

Another key advantage is the ease with which pellets can be incorporated into the existing coal-based power generation infrastructure. Pellets typically can be burned alongside coal with relatively minor modifications and capital outlay.

Pöyry has carried out extensive primary and secondary research into the wood pellet sector. The primary research consisted of numerous discussions with key industry players and participants along the whole global supply chain and various industry sources. As well as a review of the current and future global wood pellet business, the study also provides detailed country profiles for 27 major and emerging markets.

For further information about the study and business opportunities in the wood pellet market, contact: Marek Guizot, This e-mail address is being protected from spambots. You need JavaScript enabled to view it , +44 20 8770 3218; or Ania Krolak, This e-mail address is being protected from spambots. You need JavaScript enabled to view it , +44 20 8770 3215; www.poyry.com.

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