Historical price overview for wood pellets
Germany's Biomass Research Center has published a short study showing how the price of various types of wood pellets have changed over the past few years. The overview is the first of its kind.
The world of wood pellets mainly knows two colors: white and brown. The color indicates different qualities. White pellets are bark-free pellets of the highest quality and are generally reserved for the premium market of small stoves. Brown pellets get their color from their bark content, which makes them darker – and cheaper. At the same time, they are unsuitable for small stoves, which cannot handle the ash content. Brown pellets are also known as industry pellets.
Industry pellets are used in larger furnaces, such as power plants, where they are used to generate electricity – or they can also be used in large district heating plants. These furnaces are robust enough to deal with the lower quality. Sweden and Denmark are the pioneers in district heating with industrial-quality wood pellets. Both of these countries got these sectors going in the 1990s. Over the years, the Netherlands, Belgium, and the UK got on board with "co-firing," as the process is known when wood pellets are mixed in with coal in power plants.
The situation is different with white pellets. Their markets are mainly heat markets with small and mid-sized stoves – and relatively short transport. White pellets are generally shipped by truck, and the supply radius in Germany is probably not more than 150 kilometers. The situation is probably similar in other countries. The markets for premium pellets are generally national, and market monitoring of prices for white pellets is fairly established in Europe and North America. Germany and Austria are pioneers and have been documenting pellet prices monthly for years now.
In contrast, the industry pellet market is only now setting up such a monitoring system based on indices.
In 2008, the Industrial Wood Pellets price index was launched at Rotterdam's energy trading platform APX-Endex. But this platform only deals with industrial wood pellets traded in the ports of Amsterdam, Rotterdam and Antwerp (ARA). The index lists prices as CIF, meaning cost, insurance, and freight. CIF ARA has become the measuring stick for global trading of industrial pellets.
In 2009, the FOEX PIX Nordic Pellet Index was set up by Helsinki's Foex Indexes Ltd.; it also reflects CIF, but does so for pellets from the North Sea and Baltic area. While it has not drawn as much attention as the CIF ARA, the two indices together allow price trends to be studied going back to 2007.
Now, Germany's Biomass Research Center has done just that. In a brief study (PDF in German), these figures were combined with quarterly statistics from FOEX and historic market data for industry pellets in Denmark and Sweden to produce charts going back to 2003.
It turns out that the price of a ton of industrial wood pellets has remained relatively stable and is roughly half the price of white pellets in Germany and Austria. Since 2007, industrial pellets have cost between 112 and 144 euros per ton according to the study. One reason for the relative stability is that contracts are often signed with prices predetermined for several years. In addition, it is a buyer’s market, with supply coming together to serve demand. It is therefore unlikely that the price of industrial wood pellets will rise much.
While the study makes an interesting comparison with the prices of heating oil and natural gas, industrial wood pellets principally replace hard coal. Likewise, gas turbines cannot switch from natural gas to wood pellets. But another comparison is relevant: wood pellets could be used instead of heating oil and natural gas for district heat supply, though we are talking more about megawatts than kilowatts here. Whatever the case, the history of industrial wood pellet prices indicates that the market is relatively stable and will also remain considerably below the price of fossil fuels. It's good news not only for existing systems, but also for new facilities operated both by large energy providers and municipalities. (Dittmar Koop / Craig Morris)
