Italian&nbsp; homeowners burned 2.5 million tons (mmt) of wood pellets for home heat in 2013, making Italy Europe's largest residential pellet market. Over the past three years, Italy has seen a steady 15 percent demand growth. Only a small portion of Italian pellet demand is met by domestic production, however, making the country the main global importer of pellets for residential use. And, as its traditional European suppliers aren&rsquo;t quite able to keep up with the expanding demand, overseas shipments are increasing. Annalisa Paniz, the pellet expert in the Italian organization AIEL (Associazione Italiana Energie Agroforestali), reports overseas imports to Italy started to grow rapidly last year. Italian domestic production is stable or slightly down and will probably not exceed 300,000 metric tons per year, she says, not coming close to the expected consumption of 3 mmt this year. &ldquo;Around 2 million stoves and 200,000 boilers are installed in Italian homes, and sales are stable and still strong,&rdquo; she says. About 600,000 tons of pellets are expected to arrive by ship this year. Last season&rsquo;s difficulty in finding pellets on the market as winter approached led to considerably higher prices, she adds, and caused concern among market operators. The growth in pellet demand is due partly to Italy&rsquo;s unique renewable heat incentive, Conto termico, introduced by the Italian Ministry of Economic Development at the end of 2012. The incentive is working well, says Giovanni Trentin, export manager for the Palazzetti Group, one of Italy&rsquo;s largest manufacturers of pellet stoves. &ldquo;There have been complaints about the excess bureaucracy, so the energy authority, GSE, has done adjustments,&rdquo; he adds. Extended last December, Italian consumers receive a 65 percent tax deduction for energy efficiency measures such as the purchase and installation of new equipment and a 50 percent tax deduction for building renovations. Starting in January, however, the deductible share in both schemes will gradually decrease to 36 percent.&nbsp; Consumer-friendly and well-designed pellet appliances provide another incentive for style-conscious Italian consumers. The 20-plus Italian pellet stove manufacturers compete hard on the domestic and export markets, and to keep their positions, they constantly release new models and innovations. &ldquo;Palazzetti has recently released an app which allows you to communicate and interact with your stove from a distance with your smart phone,&rdquo; Trentin offers. &ldquo;You can switch the stove on or off, set the temperature, program operating hours, and even listen to the stove. The app tells you if it&rsquo;s running out of pellets, if combustion is less than perfect or if you need to call for after-sales assistance.&rdquo; Palazzetti released its latest pellet stove this summer with a panoramic glass offering a striking vision of the flame. The new 9 kW, 94 percent efficiency pellet stove Ecofire In&eacute;s, replaces the design award-winning Lola. &ldquo;By disabling the forced ventilation, In&eacute;s works even with natural convection,&rdquo; Trentin adds, resulting in a quiet stove that incorporates automatic loading with the efficiency of combustion control. Logistics Pellets arrive in Italy in one of three ways. Bulk shipments arriving in ships are the lowest cost, but with most Italian distributors being small scale, they are not able to handle the large volumes. The second option is to receive pellets already bagged or in bulk containers, with most distributors preferring bags. The third is by truck, and a large fleet of trucks arrives in Italy every day with 15 kg bags loaded on pallets or in big bags. Eight to 10 trucks daily head to Italy from just one established exporter, Estonian-headquartered Graanul Invest, Europe&rsquo;s second largest pellet producer. &ldquo;We are shipping bagged pellets from our south Lithuanian production plant in trucks,&rdquo; says G&ouml;ran Westerlund, export developer. &ldquo;There are indications there will be a great need for pellets the upcoming season in Italy, sales of stoves are still high and the neighbor countries will use more pellets themselves, therefore their exports probably will decrease.&rdquo; &ldquo;You don&acute;t need to be so big to start exporting to Europe, but you need to work together with a specialist,&rdquo; advises Arnold Dale, vice president, bioenergy, at the trading company Ekman &amp; Co. &ldquo;The largest importer/distributor in Italy handles around 200,000 tons per year, and there are some around 100,000 ton per year,&rdquo; he explains. &ldquo;The rest is handled by a large number of small distributors.&rdquo; The main market for pellets in Italy is in the north, but prices there are lower than in the south. Italian buyers can be demanding, he adds, and working in Italy can be time-consuming. Bulk shipments are obviously cheaper, if you count on large volumes and have efficient handling systems all along the line. Containerized shipments offer their own advantages. One of those, points out Graanul Invest&rsquo;s Westerlund, is that there are more potential customers able to accept container-sized lots than those that can accept large bulk shipments. Speaking in July at the Pellet Fuels Institute conference in Orlando, Florida, Jouko Sipila, AgCom/International Feed, explained another advantage is that containerization allows just-in-time operations with reduced storage risks, as well as lower shipping risks. Handling losses are minimized in container shipments compared to the multiple handling steps in bulk, he added, and shipping via container provides more flexibility with multiple ports as potential destinations. At the same PFI event, Seth Walker from RISI walked through an economic comparison of bulk versus containerized shipping and concluded there can be only small, if any, profit from containers. The exchange rate between the dollar and euro, he added, is as important as the container shipping costs. Starting from a destination market price of 275 euros per ton for an Italian bag customer (value added tax included) and with an exchange rate of $1.35 per euro and working back, including multiple fees and handling costs along the way, Walker ends with a return to a U.S. pellet mill of $153 per ton for bulk pellets and $127 for bagged pellets sent in a container. Major Players Nevertheless, several North American companies have found viable ways to navigate shipping intricacies or partner up to serve the growing Italian market. American Bioenergy Exporters LLC, one of the newcomers entering the market last year, ships bagged pellets via containers. The company purchases quality pellets from American pellet manufacturers with American contracts and conditions. According to its website, it is shipping pellets made from southern yellow pine, and will supply hardwoods upon customer request. GLM Biolegno, the Italian sales arm of the organization, sells the pellets directly to Italian retailers and small distributors under the brand USA Eagle Pellet. In this way, differently sized customers can be served, from those taking just a few containers per year up to those taking several hundred. Global Renewables markets two brands from North America. Global Renewables Italia S.r.l. imports 10,000 to 20,000 tons monthly, preferably premium ENplus A1 pellets. The Milan-based subsidiary of Global Renewables Ltd of New Zealand brings bulk pellets into Italian ports, such as Livorno on the west coast, where they are bagged for distribution. The Febo brand is produced in Georgia from pine shavings and is marketed as pellets of a &ldquo;light golden hue, capable of producing intensive heat.&rdquo; A second brand, Ecoflamma, is produced for Global Renewables by the Canadian Pinnacle Pellet Inc. The largest importer on Italy&rsquo;s east coast is Adriacoke, which cooperates with Canadian Premium Pellet Ltd., Vanderhof, British Columbia. Adriacoke is headquartered in the Port of Ravenna and controls the entire supply chain in partnership with Group Setramar, a major Adriatic leader in dry bulk logistics, from container handling to unloading and bagging pellets. The Canadian pellets are marketed under the name Professional Pellets.&nbsp; Another long-time Italian importer is Abellon Energy Italy S.r.l., a subsidiary of India-headquartered Abellon Clean Energy. Canadian subsidiary Abellon Energy Inc. operates the ENplus-certified Trebio pellet production plant in Quebec with a capacity of 130,000 tons per year. Abellon Energy Italy has storage and bagging capacity in the port of Savonna, but also imports through Naples in the south. In the big stove exhibition, Progetto Fuoco, held in Verona in February, Abellon launched Mr Pellets as its new brand for wood pellets. Other brands included Pellexo Bianca, produced by Viridis Energy, and Pelexo Platinum, produced by the Abellon facility in Quebec. Viridis Energy Inc. has exported pellets to Italy since 2011 through its subsidiary Okanagan Pellets, Kelowna, British Columbia. The company recently launched the subsidiary Viridis Merchants to trade and broker pellets. Viridis also has an agent contract with the Swedish trade company Ekman &amp; Co. German Pellets is Europe&rsquo;s largest pellet company with a global production capacity of 2.2 million tons. The company has ENplus certification for its Woodsville, Texas, facility where all 575,000 tons-per-year is intended for Europe. German Pellets owns several brands like Firestixx, Redflame and Woodox. In addition, in Northern Italy, its subsidiary, German Pellets Italy Holding, operates pellet-fed combined-heat-and-power plants. Certified Advantage One consideration for all North American exporters is certification, advises Ekman&rsquo;s Dale. &ldquo;The ENplus system will help increase your export sales,&rdquo; he says. Dale serves as a board member of the European Pellet Council and as president of the European Industry of Pellet Suppliers. Around 60 percent of the pellets consumed for domestic heating in Europe will be ENplus certified by the end of 2014, according to the pellet council. Other Italian distributors hold a different opinion of the value of certification. &ldquo;ENplus is a good initiative working for some Italian companies but is not needed for the majority,&rdquo; says Ricardo Pascolini, marketing director at Eco Pellet. &ldquo;We have our own established patented control system that certifies high quality. ENplus adds extra costs that may increase the sensitive market price.&rdquo; ---------- Author: Lennart Ljungblom Bioenergy Writer, Stockholm, Sweden <a href="mailto:lennart.ljungblom@mac.com" target="_blank">lennart.ljungblom@mac.com&nbsp;</a> + 46 - 70 739 01 05&nbsp;&nbsp;

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BULK DELIVERY: Global Renewables receives bulk pellets in ship holds, bagging them for the Italian market.   

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HIGH STYLE: Ecofire InÃ©s by Palazzetti was released this summer. It features a nice flame, silent operation and 94 percent efficiency.  

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Italian love affair with high-style pellet appliances drives pellet sales.

Pellet Heat Amore

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