Demand for wood pellets is beginning to decline both in export markets and domestically, according to Didzis Palejs, Chairman of the Board of the Latvian Biomass Association LATbio.
Assessing trends over the past month, Palejs said the situation in the pellet market is improving, although not as quickly as he had previously expected. A month ago, he anticipated a more substantial decline in pellet prices than has occurred so far.
Palejs expects pellet prices to continue falling steadily, but slowly. He said pellet producers located closer to Riga expect a more significant price decline around mid-October.
Pellets currently cost between 290 and 320 euros per tonne excluding value added tax (VAT) when purchased directly from producers, the LATbio chairman said.
He noted that
pellet prices are falling both at producers and in shops,
while availability from producers has improved compared with this summer. Palejs acknowledged that some producers still have waiting lists, but said pellet manufacturers generally report that consumers have begun buying less.
Demand for Latvian pellets is also declining in the Polish market, and this is being reflected in prices.
While Latvian pellets were previously exported to Poland at around 350 euros per tonne excluding VAT, the price for Polish buyers has now fallen to approximately 300 euros per tonne excluding VAT. Palejs stressed that these figures are approximate and prices may vary between producers.
Palejs said not all pellet producers have sufficient raw materials, with most facing difficulties securing adequate supplies.
He explained that
problems with raw material availability are primarily linked to raw material prices rising faster than pellet prices.
As a result, producers cannot afford to purchase raw materials at prices that would force them to manufacture pellets at a loss. Raw material prices remain very high, while pellet prices are declining.
Weather conditions are also making it more difficult to secure raw materials by hampering timber harvesting in forests. According to Palejs, this has a particularly significant impact on producers that manufacture more industrial pellets and use low-quality roundwood, such as timber that has deteriorated or is of an unsuitable species.
Palejs also noted that many pellet producers are concerned about a possible increase in electricity prices. He explained that a sharp rise in electricity prices would have a significant impact on production by increasing costs.
At the same time,
when electricity prices are high, cogeneration plants in export markets tend to increase production,
which in turn raises their pellet consumption. If consumption at cogeneration plants increases unexpectedly, this creates additional demand.
Higher demand from cogeneration plants could affect the distribution of available pellet supplies. If pellet supplies became insufficient while new demand emerged, this could create complications in the market, Palejs said.
In his view, there should be no pellet shortage this winter, as most people purchased the supplies they needed during the summer, leaving Latvian consumers in a relatively secure position.
“Even if the export market explodes, most Latvian consumers have already secured everything they need,” Palejs said.
LATbio was established in 2008. Its main objectives include promoting the use of biofuels, including wood, in the energy sector, supporting biofuel production and representing the interests of biofuel producers, thereby contributing to Latvia’s energy independence through the use of locally available resources.
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