FutureMetrics: Global pellet trade up 26% in 2018

By Erin Voegele | December 19, 2018

FutureMetrics has released a new white paper that features a 2018 year-end review of the pellet market. According to the paper, 2018 was one of the strongest years for the global wood pellet market in terms of growth and pricing.

The paper, authored by FutureMetrics Senior Economist Seth Walker, shows that the growth in wood pellet trade has picked up over the past year following several years of more moderate growth. From 2013 to 2014, there was a 19 percent growth in wood pellet trade, according to data included in the paper. From 2014 to 2016, the paper shows growth slowed to 7 percent per year and was accompanied by a low pricing environment and limited capacity expansions. In 2017, market conditions improved and global trade increased by 13 percent, to 18.9 million metric tons. In the paper, Walker notes that market improvement continued through 2018 as the growth in global pellet trade accelerated to 26 percent.

According to Walker, FutureMetrics currently projects 2018 pellet trade will reach 23.8 million metric tons, up from 18.9 million metric tons last year. This growth is primarily fueled by increased demand in the U.K., Denmark, South Korea and Japan, he said in the paper.

In the U.K., the paper notes pellet demand increased this year due to commissioning of the Lynemouth Power Station and conversion of a fourth unit at Drax Power Station. Next year, growth in the U.K. is expected to be driven by full operations at Lynemouth and increased availability at Drax. In 2020, FutureMetrics expects U.K. pellet demand to further increase with the scheduled commissioning of MGT’s Teeside CHP plant.

In Denmark, much of the recent growth in demand for wood pellets has come from coal-to-biomass conversions of large central power stations. Moving forward, FutureMetrics expected additional growth in demand to come from smaller-scale district heating operations and continued growth in the residential sector.

In Belgium, the paper notes that industrial wood pellet demand has remained relatively stable over the past several years. Increased imports this year seem to reflect higher capacity use at the country’s two pellet-fueled plants, along with improved conditions in the domestic heating market.

The Netherlands used to be a major market for wood pellets, according to the paper. However, the market rapidly declined in 2012 when a new renewable energy subsidy scheme was introduced. Subsidies have since been awarded for co-firing pellets at several plants. Moving into 2019 and 2020, FutureMetrics predicts the Netherlands will once again become a major market for industrial wood pellets.

Pellet demand in Italy comes primarily from home heating, rather than industrial use. While warm winters and lower prices for competing heating fuels impacted pellet demand over the past few years, FutureMetrics said volumes recovered significantly last year. Over the first eight months of this year, wood pellet imports are up 29 percent and on pace to break records set in 2014.

In Japan, the paper notes that pellet imports are on pace to exceed 1 million metric tons this year, approximately double the volume of imports for 2017. During the first three quarters of this year, 63 percent of Japan’s wood pellet imports came from the Canada, with 31 percent sourced from Vietnam. FutureMetrics expects to see continued rapid expansion in Japanese imports over the next several years.

In South Korea, wood pellet imports are expected to reach 3.4 million metric tons this year. FutureMetrics said more than 95 percent of that volume will be sourced from pellet producers in Southeast Asia.

A full copy of the white paper can be downloaded from the FutureMetrics website.