European premium pellet supply critical, study says

Premium wood pellet supply availability in Europe remains critically tight despite near-zero heating demand during the summer months, with countries having turned to Spain for supplies, a study has found.

Supply of EN Plus-certified A1-grade pellets remains critical in the UK, Germany, Austria and Italy, a study by Christian Rakos, president of the World Bioenergy Association and manager of the Austrian Pellet Industry Association, has found.

In the UK there is a shortage of 240,000t of premium wood pellets that were being delivered from Russia in previous years. The ban on imports of any wood product from Russia or Belarus with contracts concluded before 9 April took effect today as sanctions by the EU, the UK and other countries began. And certification suspension and other restrictions to trade with Russia already pared Russian deliveries to Europe in April-May.

Russia has been a key provider of spot wood pellet supplies to Europe, with nearly half of its 2.2mn t wood pellets shipped to the continent estimated to be certified premium pellets. The ban on trade is expected to result in a large supply deficit, primarily for the residential market that depends heavily on spot transactions.

UK companies have been looking to replace Russian material with US supplies, but no supplies have been contracted yet, the study finds. And switching supplies from the industrial to the premium market has proven difficult because of quality differences.

In France, although supply availability has improved compared with previous months, there is still a shortage of about 100,000-200,000t, which companies hope will partly be offset by more energy-saving behaviour by the users, the study reports. French premium pellet stocks have dropped to 50,000t this year from around 300,000t at the end of the 2020-21 heating season.

The supply situation was also considered "critical" in Germany, with orders now being accepted without fixing prices, the study found. Unusually high demand for bagged pellets suggests stronger private stockpiling in the country.

Similarly, traders in Austria were also reported to be accepting orders without a fixed price, as the supply was considered critical. Delivery times were found to take three months after orders were placed. Trading companies were quoting very high prices to encourage buyers to seek pellets from other suppliers, all of which resulted in clients with new pellet-fired heating systems calling up the local pellets industry association to complain about the shortage.

Supply availability remains "extremely" tight in Italy too, which is expected to be undersupplied in the coming winter, as many exporting countries cope with stronger local demand.

In most countries, companies new to the market were unable to secure supplies, as most providers focused on serving their existing customers.

Elsewhere, supply in Poland is expected to be stable in the coming heating season, with the country still able to receive supplies from Ukraine, although transport costs were reported have quadrupled to €2,000 for a 500km trip by truck from Lviv to Katowice. Poland was reported to be the country with the highest retail premium pellet prices, which discouraged sales of pellet-fired boilers, with reported sales having dropped to 1,800 units/month from 2,500 units/month, the study said.

Supply of pellets in Spain improved in recent months as the government's cap on electricity prices encouraged pellet producers to produce at maximum capacity, the study said.

This resulted in more enquiries by Italian trading firms for Spanish product. Portugal was also heard to have requested supplies from Spain, despite the first being traditionally a net exporter to Spain.

Stability of biomass supply in the Baltics was supported by governmental intervention, with Lithuania restricting the international export of raw materials and Latvia allowing state forests to temporarily increase felling of smaller-diameter trees to offset the missing wood chip supplies from Belarus, the study said.

By Hannah Adler