Global Wood Pellet Market Trend – A Regional Outlook

One of the prime characteristics of forest products in general, that sets them apart is that they are intrinsically unaltered, in the way that even though the processes pertaining to manufacturing have evolved and mechanization has taken place the so-called relatively new forest products Viz. wood pellets which have become integral to the energy and power industry are in reality not so new at all. The first production of wood pellets, monikered as wood pellets occurred during the 1970s. Besides, before this event, another product called the presto logs was prevalent which dates as far back as the 1930s. On the other hand, the availability of wood is also critical to sustain the market of the myriad of forest products that are made commercially available today. Thus, another distinguishing feature of the forest product market is their consistency despite the ramifications of events that are otherwise considered force majeure for other industries. To this end, it is pertinent to note that most of the forest sector was comparatively less affected due to the recognition of forestry and forest products as essential industries by many national governments as results both continued to operate during lockdowns, despite the short-lived impacts that stemmed from reduced incomes and worker availability.

wood pellet market

Form a regional perspective it is worthwhile to note that wood energy plays a crucial role as the principal sources of renewable energy in an area of 47 million square kilometers which comprises the regions of  Western Asia (Israel), North America (the United States and Canada),  as well as Central Asia (Uzbekistan, Turkmenistan, Tajikistan, Kyrgyzstan, and Kazakhstan) also known as the region pertaining to  United Nations Economic Commission for Europe or UNECE which constitutes 56 member States at present. Nevertheless, the region where wood fuel is often traded in informal markets had reportedly witnessed a slight decrease in wood fuel production and consumption by approx. 3 million m3 in 2019. From the perspective of wood pellets, the consumption of wood pellets has been reported to grow steadily due to its increased use by the industrial sector for electricity and heat purposes as well as private household heating use. It is also estimated by UNECE that 80% of the global production of wood pellets is carried out in the aforementioned region which also contributes to 90% of the global exports, partly responsible for sustaining the global wood pellet market. Moreover, during 2019, the region registered a value of production that was in the order of 33 million tons which was an increase by 7.6% from that of 2018. Out of all the subregions of Europe was the highest producer and consumer and North America was the topmost exporter of wood pellets globally. The Belarus and Russian Federation registered an increase in wood pellets production by 48% and 14%.  Besides, policies pertaining to renewable energy that seek to minimize the share of fossil fuels in national energy balance are the principal factors that are propelling demand for international trade of wood pellets. After the USA and Canada and outside the aforesaid regions, Vietnam is the 3rd most noteworthy exporter of wood pellets. And Malaysia had reported an export volume of 61500 tones in 2019.

Wood Pellets Production

wood pellet market

In 1,000 m.t

Source: UNECE/FAO TIMBER database, 2020

Europe Is the Leading Producer of Wood Pellets Around the World

The production of wood pellets in Europe was in the order of 18.8 million m3 in 2019 which was an increase by 8%. The imports of wood pellets by Europe also increased by 5.3% (in comparison with the import volumes registered during 2018.) surpassing 19 million tons. Within Europe, the Netherlands was reportedly increased its import of wood pellets to twice its previously registered volume to 1.22 million tons sourced primarily from the Baltic states, followed by Belgium, the Russian Federation, and the US.  Also, the US-based export of wood pellets to the Netherlands was hindered by the dearth of certification at the forest level which is required for the stimulus funds related to Sustainable Energy Production. Additionally, winter temperatures in 2019 which were milder than the average and adequate supply resulted in a decline in traded wood fuels unit values which encompassed wood pellet. As far as the production of wood pellets in the Western Balkans are concerned it increased by 22% to 1.5 million tons out of which more than half which was in the order of 781,000 tons were exported. Nevertheless, the production of wood pellets fell by approx. 20% during the 1st quarter of 2020 in comparison with that of the first quarter of 2019. Whereas the consumption in that region increased by 21.3% during 2019 potentially resulting from the national policies in Bosnia and Herzegovina as well as Serbia to substitute obsolete coal- and heating-oil-fired heaters in public buildings to replace obsolete coal- and heating-oil-fired heaters with wood-based systems.

The Comparatively Dynamic EECAA Wood Pellets Market

As far as the wood pellet market of Eastern Europe, the Caucasus and Central Asia (EECCA) is concerned the condition is even more dynamic. The wood pellet production during 2019 increased by 12% in the region in 2019 to 2.5 million tons. Further, the subregions witnessed its production of wood pellets grow almost twice during the past 5 years which was propelled by the demand from areas outside the region because approx. 2/3rd of the production is exported to Asia and Europe. The principal wood pellets producer and consumer in the EECCA is The Russian Federation despite the figures of Belarus which encompasses a higher increase in consumption which is by 102.3% leading to a volume of 46,000 tons as well as production which saw an increase by 48.2% and registered a volume of 412,000 tons. There has been an announcement of the construction of a few new wood pellets plants in the region which comprises two turnkey pellet plants with a combined capacity of 20 tons per hour in Belarus by Engineering company Prodesa. The facilities which have been reported to be built near the cities of Vitebsk and Polotsk, in north-east Belarus are expected to come online in early 2021.