Wood pellet spot price dips on low demand

Aug. 25,
2010, London, UK – Spot prices for industrial wood pellets slipped lower in
northwest Europe during the past week. Producers on both sides of the Atlantic
failed to find bids for heavily discounted cargoes, as many utilities have
already filled the majority of winter requirements.

The lack
of demand for pellets for power generation has seen several European traders
turn their attention to facilitating district heating demand requirements. The
Scandinavian market is the primary target, but Germany, Italy, and Austria have
requirements as they move into heating season.

U.S.
producers not locked into long-term contracts are continuing to offer cheap
cargoes to Europe at discounted levels. Many participants expect to see
producers continue to offer at levels below €110/tonne CIF ARA into the fourth
quarter.

“Producers
who do not have long-term prices locked into supply deals are vulnerable and
willing to offer at discounted levels in an attempt to offload stock,” one
European trader said. “The situation could be exacerbated by the opening of
large pellet plants in Russia by Ekman; Germany's RWE in Georgia, USA, and Electrabel/GDF
Suez in British Columbia, Canada. So the outlook is bearish for many of the
world's 50–70 wood pellet producers with open positions fighting to secure
offers.”

Another
European trader issued a sell tender for a 5,000-tonne cargo from North America
at €120/tonne on an FOB basis, but confirmed that it has received no interested
offers as yet.

Pellet
throughputs at Rotterdam reveal this year's collapse in demand. Major biomass
handler European Bulk Services said throughputs so far this year stand at
90,000 tonnes. Last year, the terminal saw a rise of over 60% to 240,000 tonnes
over the 2008 period.

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