“In the coming years, the Asian pellet market is going to grow at a faster pace than the European market not only in terms of production but also in terms of consumption,” explained Gilles Gauthier, Business Development Manager of Bioenergy Europe, Brussels. In 2018, Asian pellet consumption (without China) increased by 45% year on year to a total of 4.8 million tons. Production rose by 55% to 3.7 million tons. In South Korea and Japan, demand for industrial pellets has seen a constant growth since 2012 and reached 3.9 million tons in South Korea and 1.7 million tons in Japan last year. American consultancy firm FutureMetrics expects Japanese and South Korean demand to rise to 6.8 million and 6.4 million tons, respectively, until 2025.
In Europe, 20.1 million tons of pellets were produced in 2018 and 27.1 million tons were consumed. The former EU 28 had a production of 16.9 million tons and a consumption of 26.1 million tons. Imports from the US amounted to 7.8 million tons, i.e. to 72% of overall US-American annual production.
Great Britain, Denmark and the Netherlands are booming
In the years from 2010 to 2022, the global demand for industrial pellets increases on average by 2.2 million tons a year. In 2019, EU consumption recorded a rise of 9% (14.4 million tons) compared to 2018, 8.5 million tons of which in Great Britain. FutureMetrics expects consumption to reach 11.2 million tons in Great Britain and 3.4 million tons each in Denmark and the Netherlands by 2025.
“In Sweden, Latvia and Estonia, production figures are falling due to the difficulties in raw material supply. An increase in production was recorded in Germany, Russia, France, Austria, Poland, Portugal and Belgium,” reported Gauthier. In Europe, there is a trend towards smaller and decentralized pellet productions. “In the Scandinavian and Baltic countries, many sawmills decide to enter the pellet market themselves, rather than having raw material prices dictated by big producers,” said Gauthier. With the increasing wealth of the population in the Baltic states and Balkans, more pellets are used for domestic markets. In 2018, the countries of the Balkans exported 690,000 tons which is 58% of production. “In the Baltic region, consumption is rising towards 500,000 tons a year due to increasing wealth,” informed Didzis Palejs of CM Biomass.
Russia and Ukraine with potential
According to Gauthier, Russia has the potential to become an important producer of pellets. In 2018, 238 million m³ were logged in the country, of which 30 million m³ were exported to China and 114 million m³ were processed into sawn timber. Half of the remaining wood was reused. 13 million m³ were burnt in boiler plants and 17 million m³ each were used by the engineered timber industry or processed into wood waste. “When making a more conservative estimate (2.5 m³ is needed for 1 t of pellets), the 17 million m³ of wood waste can be processed into 6.8 million tons of pellets a year. In 2018, Russia produced 1.7 million tons and in 2019, production was at 2 million tons,” Gauthier said.
80% (396,000 tons) of Ukrainian pellet production was exported in 2018. The main markets were Poland (123,000 tons) and Italy (94,000 tons). “The energy potential of biomass in the Ukraine is enough to replace all gas and coal imports,” explained Sofiia Levinska of the Ukrainian Biomass Association.
CO2 tax in Sweden, Finland and France
Sweden has had a tax on CO2 emissions since 1991 (€ 120 per ton of CO2). The government wants Sweden to be completely fossil-free by 2050. The pellet industry roughly has a 30% market share in the bioenergy industry. “The consumption of 8 TWh a year can be raised by another 4 TWH a year. In the timber industry as well as in the mining industry, I see possibilities for replacing coal and gas with renewable energies,” analyzed Fredrik Zetterlund of Svebio. In 2019, pellet consumption was at 1.7 million tons, of which 570,000 tons were used in private households.
Finland wants to be carbon-neutral by 2035 and uses a tax on CO2 emissions for fossil energies (20 to 27 €/MWh). By 2024, oil-fired boilers are to be removed in all government buildings. The use of coal is to end in 2029 and that of natural gas in 2030. Pellet production (2018: 385,000 tons) is relatively small and there is a lack especially in medium-sized productions. “The high number of other types of wood-based biomass, most of all wood chips, bark and sawdust, as well as competition with heat pumps are the reasons for the low pellet consumption,” explained Hannes Tuohiniitty of the Bioenergy Association of Finland Bioenergia.
In France, pellet stove sales for private households rose to over 150,000 pieces a year after the introduction of a CO2 tax in 2014, and since 2018, the number of pellet boilers also doubled to 14,000 a year. “In the next five years, 1 million oil-fired boilers have to be replaced with more climate-friendly boilers,” said Gauthier. In Italy, pellet stove sales saw a 9% decrease year on year (2018: 181,000). On the other hand, 67% of stoves in Italy have been in use for more than 10 years and can be replaced. “This is a big opportunity for our market,” comments Gauthier.
In Spain, pellet consumption and production have been nearly the same for some years. In 2018, 593,000 tons were produced and consumption amounted to 573,000 tons. The Spanish Biomass Association Averbiom expects that production and consumption will increase by 900,000 tons each until 2022. In 2018, annual production capacity was at 1.8 million tons and Averbiom estimates that it will reach 2.3 million tons in 2022. Since 2014, the number of sold pellet stoves rose by 45% to 52,000 year and Averbiom expects that in 2022 55,000 stoves a year will be sold.