Industrial Wood Pellet Prices Drop Despite Russian Ban
The price of industrial wood pellets, which are used in power generation, have fallen dramatically in Europe this year despite a ban on Russian material, with UK power generators having consumed less than expected, market participants said.
Market sources have reported that industrial wood pellets were pegged at more than USD 300/t in early 2023 and close to USD 400/t in the latter half of last year but were now seen as low as USD 170/t. This significant drop in price is due to the UK’s 2.6 GW biomass-fired Drax plant and Czech utility consuming less than expected.
The Drax plant, which is the largest biomass plant in the world, had previously been consuming large quantities of industrial wood pellets. However, it has since reduced its consumption as it has switched to burning gas instead of coal. This shift was due to the UK government’s decision to phase out coal-fired power plants by 2025.
In addition, the Czech utility has also reduced its consumption of industrial wood pellets due to the closure of some of its coal-fired power plants. This has resulted in a surplus of industrial wood pellets in the market, leading to the drop in prices.
Despite the ban on Russian material, the drop in demand for industrial wood pellets has resulted in an oversupply in the market. The ban was implemented due to concerns over the sustainability of Russian forests and the impact of logging on the environment. However, the ban has not had the expected impact on the market as there is still an abundance of industrial wood pellets available.
The oversupply of industrial wood pellets has also been attributed to the increase in production in other countries such as the United States and Canada. These countries have been able to increase their production due to the availability of raw materials and the development of their infrastructure.
The drop in price of industrial wood pellets has had a significant impact on the market. Power generators in Europe have been able to purchase industrial wood pellets at a much lower cost, resulting in lower electricity prices for consumers. This has also led to an increase in the use of biomass power generation in Europe.
However, the drop in price has had a negative impact on the producers of industrial wood pellets. Many producers have been forced to reduce their prices in order to remain competitive in the market. This has resulted in a decrease in revenue for these producers and has led to job losses in some areas.
In conclusion, the drop in price of industrial wood pellets in Europe has been attributed to the decrease in demand from power generators and the oversupply in the market. Despite the ban on Russian material, the market has still been able to meet the demand for industrial wood pellets due to the increase in production in other countries. While the drop in price has had a positive impact on consumers, it has had a negative impact on producers and their employees.
