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Wood pellet prices in Europe rise sharply
Update time：
2022-03-15
On October 31, FutureMetrics released a new white paper explaining how sanctions against Russia have led to a reduction in the supply of pellets in Western Europe and the United Kingdom, resulting in a supply chain shock that has led to a significant increase in pellet prices.
In the paper, FutureMetrics President William Strauss explains that supply shocks occur when a large portion of a good or service is no longer available in the marketplace and substitutes are scarce or non-existent. The Russian-Ukrainian war and the resulting sanctions against Russia have created a supply shock in the European heating pellet market.
Global wood pellet supply and demand trends
According to Strauss, the average global supply of pellets has been sufficient to meet demand. Although there were localized seasonal shortages during the unusually long, cold winter, total supply has been sufficient to meet total demand. The market has not experienced any medium- to long-term supply shocks in the past decade. However, 2022 is not a typical year.
Strauss explained that the conflict in Ukraine and the ensuing sanctions have severely impacted the pellet industry. Last year, Russia, Belarus and Ukraine produced 15% of the global trade in wood pellets. A large portion of these pellets were sold to the heating market in Western Europe. With sanctions now in place in Russia, a large portion of the 3.5 million tons of wood pellets exported from these regions last year has been denied access to the European market.
Schematic diagram of Russian pellet exports in 2021
Strauss noted that as of the third quarter, Russia was still exporting wood chip pellets. However, these pellets are increasingly being supplied to the Korean market.
Due to the supply shock in Europe, the price of pellet fuel has risen to unprecedented levels in every country that uses pellets for heat or power generation. Strauss cites data showing that industrial (power generation) pellets are trading at more than $453 per ton on the spot market. Prices for heating pellets have risen even higher in many European markets in recent months, with the bulk price in Germany exceeding $760 per ton earlier this fall.
EU Heating Pellets (Retail) Price Trends
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