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Viewpoint: Wood chip supply may tighten in 2025

  • : Biomass
  • 24/12/27

Wood chip raw material availability has grown tighter in Europe in the past couple of years and is expected to remain so in 2025, but its impact on the spot market has been limited by lower-than-typical overall demand in the period. A stronger consumption outlook by energy and other industrial segments at existing and new plants may put the market to test in 2025.

In the Nordics, wood chip supply availability was tight this year in the wake of a cut-off in Russian and Belarus supply following sanctions in 2022 and harvesting restrictions imposed by national and EU regulations.

A slowdown in sawmilling also contributed to a steady tightening of wood chip supply, particularly in Finland, who's imports rose year on year in 2024 as companies struggled with increased domestic wood chip prices as raw material prices held high.

Swedish hardwood chip imports over the first nine months of 2024 held considerably higher than long term averages but were lower when compared with a year prior (see chart). This was mainly owing to a year-on-year a drop in receipts from Uruguay, Germany and Portugal.

Swedish end-users struggled to meet demand from local sources that at most times were uncompetitive with chips from abroad. Swedish forest industry group Sodra, located in southern Sweden, raised the prices of its wood to historical highs earlier in the year and also expects 2025 to be a "challenging" year.

Wood chip supply in the Baltics also was tightened by a slowdown in sawmilling that weighed on sawmill residue supply and is not expected to improve in the near term. But forestry feedstock was available, and prices of fuel wood harvested in Estonia's state and private-owned forests edged down on the year in January-October, following record-high prices in 2022, data from Estonian state forestry agency RMK and private forestry centre Eramets show, although prices were still well above long-term averages (see graph).

This scarcity has yet to have a market impact as end-users still are well supplied with near capacity stocks. End-users delayed deliveries where they could or put deliveries into storage over October-November 2024.

Most northern European utilities switched on their wood chip-fired boilers later than usual as warmer weather pared heating demand.

Outages further pressured on the demand side, with Swedish utility Stockholm Exergi's 190MW Vartan 1 having undergone an outage of nearly six months that is scheduled to end on 27 January 2025.

Although consumption picked up from late November as temperatures dropped, the delay in wood chip burn for heat generation has left end-users with ample stocks.

But a structural lack of raw materials probably will tighten wood chip supply once consumption picks up in the first half of next year on forecast colder weather. Lower temperatures forecast over the next month should result in quicker stock withdrawals and encourage spot demand. For example, overnight temperatures in Oslo, Norway, are forecast to average minus 5.5°C, about 0.5°C below seasonal norms in the 45 days to 9 February, Speedwell Weather data show.

Elsewhere, in Poland, supply availability of biomass may tighten, if the draft regulation on requirements for domestic energy wood put forward by the government in July is approved. But it is likely that the restrictions will be softened in the final draft by the ministry, following public consultation in the preceding months, market sources said.

Looking forward, new projects across northwest Europe probably will support import demand.

While a 13-month outage that began on 12 December 2023 at Gazel Energie's 150MW wood chip-fired Provence 4 power plant weakened wood chip consumption this year, it is scheduled to resume operations on 5 January 2025. Gazel Energie reached a deal with the French government to supply power from the plant over the coming eight years, which may bolster imports. French hardwood imports more than halved in January-September this year compared with a year earlier.

Elsewhere, in Finland, energy company Joensuu Biocoal is set to begin commercial operations at the 60,000 t/yr heat-treated biomass production plant in the first quarter of next year. Paired with fresh demand from new projects planned for the first quarter of 2025, the deficit of supply seen in the woody feedstock market this year probably will continue into 2025, tightening wood chip availability once consumption picks up.

Swedish imports of hardwood chips '000t

Estonia raw material prices €/m3

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25/01/16

Brazil to face weaker La Nina conditions

Brazil to face weaker La Nina conditions

Sao Paulo, 16 January (Argus) — Many government agencies expect a weaker La Nina weather pattern in Brazil — partially because of its delayed start — that could help reverse damages from a previous droughtand boost hydroelectric power generation. La Nina conditions emerged a month later than expected, starting only in January, according to national meteorology institute Inmet. Its presence was confirmed by the US' National Oceanic and Atmospheric Administration (NOAA) and is 40pc likely to last until March-May. Delayed La Nina conditions and its weaker effects on Brazil's climate may be linked to the global average temperature hitting an all-time high in 2024 , according to the World Meteorological Organization. La Nina conditions develop when the surface waters in the tropical Pacific Ocean are cooler-than-average across the central and central-eastern regions. But global oceans have been running much warmer for more than a year, which could have delayed the phenomena, according to NOAA. Its usually causes heavier rains in Brazil's northern and northeastern regions, while central-southern states experience drier weather and heatwaves. Brazil, along with South America as a whole, has a history of droughts , agricultural losses , and higher ethanol prices in previous La Nina seasons, but the effects this year will be milder and potentially beneficial to industries in some regions. Agriculture Despite its conditions set to last throughout the first quarter of 2025, Brazil's 2024-25 crop is expected to hit a record 322.3mn metric tonnes (t), up from 297.8mn t in the previous crop, according to national supply company Conab. Still, most forecasts rely on previous favorable conditions during the development of the 2024-25 crop. The soybean crop is set to be 13pc higher than in 2023-24, reaching 166.33mn t. Corn also is expected to increase production, reaching 119.6mn, a 3.3pc rise from the previous crop. But previous dry weather and low precipitation harmed center-southern sugarcane producers, which are responsible for 91pc of the national sugarcane output. The 2024-25 sugarcane crop is forecast to reach 678.7mn t, a 4.8pc decline from the previous season, according to Conab. La Nina's conditions may recover some of the sugarcane crop this season. Northeastern sugarcane production, harmed by last year's drought, will face a period of heavy rains brought by the phenomenon in January. But the sugarcane crop is already projected to decline by 30pc from the previous crop regardless, according to northeastern sugarcane producers' association Unida. The last time La Nina hit Brazil, in 2020-23, roughly 40pc of the main center-south sugarcane crop was at risk from dry weather . Ethanol Ethanol production is set to increase by 1.3pc in 2024-25 from the previous season, according to Conab. Still, sugarcane ethanol is outlined to shrink by 2.8pc thanks to 2024's dry weather and wildfires in the southeast. Electricity La Nina's late arrival enabled the summer rainy period in Brazil. The main hydroelectric reservoirs recovered from last year's drought and will end this month above half of their capacity, according to national grid operator ONS. Regardless of La Nina's presence, most of the central-southern states are expected to have above-average rains in January-April, according to Inmet. Temperatures are also set to stay above the historical average in the central-western, southeastern, southern and northern states. By Maria Frazatto Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Korea's REC changes may pare long-term biomass imports


25/01/10
25/01/10

Korea's REC changes may pare long-term biomass imports

Singapore, 10 January (Argus) — South Korea's renewable energy credit (REC) scheme revisions for biomass-fired power generation will boost private and state-run utilities' wood pellet imports in the short term, then curb them in the long run. The South Korean government on 18 December announced a gradual reduction in RECs for biomass-fired generation. The new rules are set to bolster pellet imports in the short term, but the gradual reduction in RECs will result in lower overall imports and new market trends in the longer run. The changes were designed differently for state-run producers and independent power producers (IPPs), so the impact on each group is different. RECs for state-run power generators will be reduced from 1.5 in 2025 to 0.5 for dedicated biomass utilities by 2027, and 0 for co-fired biomass generation producers. RECs for IPPs will be reduced to the same respective levels but over 20 years starting from 2026, after a one-year grace period. (see tables) State-run utilities will see the largest impact in the near term, given the much shorter timeline for their credit reduction, with a stronger incentive for generators to increase output when REC credits are higher. This is set to bolster imports over the next three years as utilities secure most of their pellet needs from abroad. This is in contrast to IPPs, which will see a more gradual REC reduction in the 20 years from 2026, and their demand for imports is expected to be broadly unaffected in the near term. IPPs also have an incentive to burn more in the coming few years because of the higher REC rates compared to later. Biomass-fired generation at some utilities may rise by 10-15pc on the year in 2025, according to a South Korean buyer. Higher demand for spot wood pellet cargoes has already lent support to the spot fob Vietnam price to South Korea in recent weeks. South Korean demand for imports may decline in the longer term, if the reduced state support leads to uneconomical margins for utilities. Vietnamese suppliers have already expressed concerns about South Korean demand spiking in the near term only to decline in subsequent years. Some utilities are set to reach the end of their economic life in the mid-2030s, including the 100pc biomass-fired Yeong-Dong units 1 and 2 which are set to shut down in 2032 and 2035 respectively. This will cut overall demand for pellets unless new power plant projects are launched. The reduction in RECs is also set to discourage new investment. Investment firm Glenwood Private Equity, which had signed a preliminary agreement to acquire South Korean IPP SGC Green Power, cancelled the deal after the government's announcement on the reduction of RECs in December. Utilities may also start looking for alternative, cheaper feedstocks such as wood chips going forward. Expectations of a decline in overall South Korean demand for pellets may encourage southeast Asian producers to seek to sell more to other markets such as Japan or Europe, a Vietnamese pellet producer said. By Joshua Sim REC for state-owned utilities /MW Year REC rate 2024 1.50 2025 1.00 2026 0.75 2027 0.50 Source: South Korea's Ministry of Trade, Industry and Energy REC for independent power producers /MW Year REC rate 2025 1.50 2026 1.49 2027 1.49 2028 1.48 2029 1.47 2030 1.46 2031 1.45 2032 1.44 2033 1.43 2034 1.41 2035 1.40 2036 1.37 2037 1.35 2038 1.32 2039 1.29 2040 1.24 2041 1.18 2042 1.10 2043 0.99 2044 0.81 2045 0.50 Source: South Korea's Ministry of Trade, Industry and Energy Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Adjustments to Dutch low-carbon subsidy scheme in 1Q25


24/12/31
24/12/31

Adjustments to Dutch low-carbon subsidy scheme in 1Q25

London, 31 December (Argus) — The Dutch government will inform parliament of an opening round of adjustments to the stimulation of sustainable energy production and climate transition (SDE++) scheme — which targets technologies related to low-carbon power and C02 sequestration — that can be made in the first quarter of 2025, following an exploration into the future of the scheme launched last year. In a letter to parliament released last week, the climate ministry and green groups laid out the findings, conclusions and possible follow-up steps for each technology type — renewable power, renewable heat, renewable gas, low-carbon heat and low-carbon production — included in the SDE++. The government included gasification of biomass in the scheme's renewable heat technology group, as well as geothermal energy, solar thermal and fermentation. Former Dutch climate and energy minister Rob Jetten told the Dutch parliament earlier this year that the government had decided to cut state support for new biomass-fired power generation under the SDE++ scheme. The SDE++ has become complex over the years, its implementation increasingly challenging, the letter said. And limits of what more appropriate support is possible within the current instrument have been reached. Although the SDE++ — possibly with adjustments — is still an appropriate instrument for the "time being" for some techniques, others may benefit from another form of stimulation, such as an investment subsidy, the ministry said. But until suitable alternative instruments are available, the SDE++ will remain available for these techniques. The number of categories in the SDE++ reached approximately 180 in 2024. The government will continue exploring adjustments to the SDE++ and replacement instruments and prepare a "complete" package of proposals in autumn 2025. By Hannah Adler Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Pellet boiler sales to drop in 2025


24/12/27
24/12/27

Viewpoint: Pellet boiler sales to drop in 2025

London, 27 December (Argus) — Sales of pellet-fired boilers and stoves for residential consumption are set to fall in 2025, after reaching record highs in 2024, partly because of government subsidies in Austria and Germany. The Austrian government has offered subsidies of up to €18,000 ($18,800) towards the price of a pellet stove or boiler — around 75pc of the cost of the appliance. The subsidies have been in place for the past two years, with the aim of incentivising households to switch away from fossil fuels. Low-income consumers are able to qualify for a subsidy of up to 100pc of the cost of a stove or boiler. This pushed up Austrian new boiler purchases to a record high of 19,181 in January-November, leading to expectations that full-year sales will surpass 2022 full-year sales of 21,629, figures from industry association ProPellets Austria show. Austrian pellet consumption is expected to reach 1.4mn t in 2024, well above the 1.2 mn t sold a year earlier. But Austrian elections earlier this year have resulted in a new and more conservative coalition government taking office, which will likely alter the subsidy scheme and reduce the subsidies' value. Coalition negotiations are currently ongoing. Several customer registrations for the subsidy scheme are still being finalised, so these buyers will likely purchase their boilers using the subsidies in the new year, according to ProPellets Austria data. This means boiler sales will probably be above the long-term average next year but below 2024 sales. Germany has launched a similar subsidy scheme, covering up to 70pc of the cost of a boiler. Wood pellet exports out of the country decreased by 139,705t on the year to 512,980t in January-September, customs data show, suggesting increased local demand. Wood pellet consumption in Switzerland is also expected to be stronger year on year, at 470,000t this year compared with 416,197t in 2023, according to wood pellet association ProPellets Switzerland data and projections. Meanwhile, pellet demand from the Italian and French markets has decreased on the year as the consumer base in those countries has declined. Italian and French households are not using pellet-fired stoves or boilers for their heating needs as much as they did in the past. And several buyers in Italy and France were still relying on stocks carried over from the previous year, as mild weather reduced consumption that year. Italian household pellet consumption fell to an estimated 2.2mn-2.4mn t in 2024 from around 3mn t/yr a year earlier, and this has weighed on pellet trading activity with pellet producers in the Baltic region — one of the main suppliers to the Italian market. Higher transport costs made it unprofitable to import pellets from the Baltic — which is over 700-800km away from Italy. And the cost of raw materials in the Baltic region increased this year, meaning pellets from the region were outpriced by pellets from other markets. Italian buyers are now heavily reliant on cheaper Brazilian pellets, which has also weighed on imports from other countries. Italy imported 262,245t from Brazil in January-September, up from 186,770t over the same period in 2023, the latest customs data show. This trend could continue well into 2025, with Brazil becoming an increasingly influential sourcing country for Europe. Danish imports from Brazil rose to 77,375t in January-November 2024 from just 1,110t a year earlier, customs data show. By Marta Imarisio Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Narrowing upside for gas, biomass in Polish transition


24/12/24
24/12/24

Narrowing upside for gas, biomass in Polish transition

Warsaw, 24 December (Argus) — Reducing the carbon intensity of Poland's coal-dominated district heating sector will boost demand for biomass and gas, but the transition away from coal will require a combination of these and other technologies to succeed. Poland's district heating producers are increasingly incentivised to invest in renewables-based electrification, including solar-powered heat pumps, which could tempt them away from converting units to gas or biomass. "If we go on the ambitious path of heat pumps and full decarbonisation, it will be easier for us to receive full public financing," Przemyslaw Budzynski, general director of the district heat producer in the town of Mragowo, told Argus . The producer invested in an 8MW wood chip-fired unit in 2022, but still operates more than 11MW of coal-fired heat production capacity. The utility is nearing a decision on whether to build a gas-fired combined heat and power (CHP) plant or more technically difficult but easily financed options such as a refuse-derived fuel waste-fired capacity or heat pumps. Such deliberations are common among the approximately 350 district heat producers in Poland, which collectively account for more than 53GW of thermal capacity, according to Polish energy regulator URE. These plants supply hot water for heat to about half of the country's households, particularly in urban areas. As of 2022, coal still accounted for more than two-thirds of the fuel used in these plants, with annual consumption of more than 13mn t/yr, according to URE. Until recently, conversions to gas or biomass firing were the most popular alternative to coal for district heat generators, which consumed 410,000TJ of gas (around 114TWh) and 55,000TJ of biomass — equivalent to 3.2mn t of wood pellets — in 2022, according to URE data. After European energy prices spiked in 2022-23, district heaters' determination to move away from coal strengthened. But these are typically small municipality owned entities that rely on public support for investment. Polish state-owned environment fund NFOS provided 1.6bn zlotys ($390mn) of financing in 2019-21 to phase out coal district heating plants. NFOS said conversion to gas was the most popular technology in its scheme, but it also financed many conversions to biomass. But NFOS excluded gas and biomass from its latest scheme in April-December — the main programme offering direct financial support to heat generators. It instead only offered funds for the development of heat pumps, geothermal and solar collectors. The scheme pledged more than 924mn zlotys to at least 16 projects, NFOS said this week. Representatives of industry and financial institutions argue that a mixed bag of technologies — including gas, biomass and other forms of renewables — are needed for the transition away from coal. Biomass supplies alone would be insufficient to replace all the coal used in district heating, and a full-scale coal-to-gas transition would also be complicated because of security of supply and price volatility concerns. Gas, biomass for larger utilities Despite the narrowing window for gas and biomass in the smaller district heating segment, growth opportunities remain for these fuels at larger utilities that have higher financial capabilities and rely less on state funding. Some Polish government-controlled utilities with district heating subsidiaries have adopted strategies that use a host of technologies. Energa is investing to replace coal with gas boilers at its heating plants in Ostroleka, Kalisz and Elblag, set to come on line in 2025. PGE also plans to complete 15 coal-to-gas conversion projects by 2030. Orlen subsidiary PGNiG Termika is looking to partly convert to biomass at its Pruszkow CHP plant near Warsaw, with a 44MWt coal-to-biomass conversion to be complete within the next two years. The utility also plans to restart co-firing biomass with coal at its Zeran CHP in Warsaw — with 494MW of gas and 298MW of coal-fired capacity — to reduce carbon emissions costs. Biomass classifies as a renewable source of energy and is zero-rated under the EU's emissions trading scheme. Tauron, whose district heat subsidiary still has 65pc coal in its fuel mix, last week announced plans to fully exit coal by 2030, by investing in biomass, gas, heat pumps and other technologies. By Tomasz Stepien Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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