Dr. Christian Rakos, Managing Director of proPellets Austria © proPellets Austria
Holzkurier: Pellet prices have doubled in the DACH region since last year. In Germany, they even tripled. What are the main reasons for this development?
Dr. Christian Rakos: The main reasons are rising production costs, especially the cost of raw material and electricity, and the Europe-wide bottlenecks in supply. The latter were caused by the strong growth in pellet heating systems and the interruption of deliveries from Russia, Belarus and Ukraine.
Are further price increases to be expected during this heating season?
The further development of prices depends mostly on how cold the winter will be. At the moment, though, there are signs that the market situation will be less tense.
I think that the situation will become increasingly difficult for pellet mills which don’t have their own log wood supply because many of the new plants are built by the sawmill industry.
Some EU countries, such as Romania, plan to cap firewood and pellet prices. Would this measure also make sense for the DACH region?
Capping prices could lead to an increase in exports to regions where prices are higher and therefore be counterproductive from a supply point of view. Granting subsidies to consumers when they purchase pellets and the like, something that is done with other energy sources, would help to avoid this, but I find it difficult to imagine.
Sawmill by-products are crucial for the raw material supply of pellet plants in the DACH region. What other sources play a role?
So far, industrial wood has not been used at all in Austria or only in very small quantities. I think that the increase in raw material consumption will result from expanding the use of wood chips rather than industrial wood. However, the first pelleting plant, which plans to use debarked industrial wood as raw material, is currently being put into operation.
Prices for sawmill by-products are rising, while log prices are falling. Sawmills are reducing cutting volumes. Will sawlogs soon be used for pelleting as well?
I don’t think so. What can be observed at the moment is an increased use of industrial wood chips.
The wood processing industry continues to make investments aimed at creating added value. Pellet capacities are being expanded and new pellet plants are being built. Is this a trend that will continue?
The current wave of investments in Austria is substantial but I don’t think that this trend will continue for a longer time. At some point, the limit will be reached when it comes to the raw material. At an international level, however, there is still plenty of room for expansions and investments are being made in pelleting plants around the world.
Which short and medium-term changes will pellet mills face which do not have their own raw material supply?
I think that the situation will become increasingly difficult for those pellet mills because many of the new plants are built by the sawmill industry and the market for sawmill by-products will become smaller as a result.
In the DACH region, companies mainly produce certified pellets. What role will industrial-quality pellets play in the next few years?
I think there will be a substantial increase in demand for pellets for commercial and industrial uses in the coming years, which might lead to industrial pellets and international trade playing a bigger role here than they did so far.
According to the decision of the EU Parliament on the Renewable Energy Directive (RED III), wood biomass for the generation of energy is only partially sustainable and therefore only partially eligible for subsidies.
This is not a law, but the position of Parliament for the final negotiations of the RED III Directive. I assume that the EU Parliament’s ideas on this matter won’t be accepted by the Council and the Commission.
Which consequences does that have for the pellet industry and the pellet market?
None.
Let’s try to make a forecast for the next three to five years. What is a best-case and a worst-case scenario for the pellet industry in your opinion?
The worst-case scenario is that soaring prices and the resulting damage to the industry’s image might ultimately lead to a sharp decline in demand for pellet heating systems. The best-case scenario would be modest further growth.
