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Wood Pellet Global Market Report 2014
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Due to the global economy recovery, the demand for energy is increasing, and wood pellets as a new energy is also highly demanded internationally. In 2013, numerous companies invested in wood pellet plants which can covert biomass into pellets, which will be used for heat and electricity production. And the global pellet production reached 23.6 million tonnes in 2013, which is increased nearly 13% over 2013 volumes. As for 2014, the statistics is not yet fully available at present, however, according to related research study, the global production capacity of wood pellets is increased 8% and the global capacity of wood pellets has been reached to 25.5 million tons estimated, which is showed in the following table.
In terms of global perspective, in 2013 EU remains to be the largest wood pellet demander and producer, which produced 12.0 million tons pellets, with Germany, Sweden, Latvia, and Portugal as its top producers. Then it is Canada and US, Russia, and China, with pellet production capacity of 6.0 million tons, 2.0 million tons, and 2.0 million tons respectively. The following pie diagram is showed for your reference.
As for wood pellet consumption in 2013, Europe ranked top, which demanded 10.0 million tons of wood pellets for domestic heat production while 9.0 million tons of wood pellets for industrial uses, and it was followed by North America and Asia, with wood pellet consumption of 4.0 million tons and 1.0 million tons respectively. The world regional pellet consumption pie diagram is presented for your reference.
In wood pellets global trade, Europe played a vital role in order to meet its growing demand for wood pellets. In 2013, the Europe imported about 6.4 million tons of wood pellets, with around 75% of total imports from North America, which is an 55% of increase comparing with 2012, and the rest was almost from Russia and Eastern Europe. Detailed statistics of wood pellet exporting and importing trade is presented in the following table for your sake.
World Regional Wood Pellet Market Analysis
European Wood Pellet Markets
The EU market is the world’s largest wood pellet market, with a consumption of around 17 to 19 MMT of pellets in 2013, which is expected to grow around 21 MMT in 2015, according to the study based on EC mandates and member State incentives.
With a production of about 11.5 million MT in 2013, nearly 50 % of global production, EU is the biggest wood pellet producer globally. Comparing with that in North America, the pellet production plants are in small or medium scale, however, most of the main pellet producing countries have a considerable demand for wood pellet which is used for domestic heating production. The increasing demand for wood pellets has expanded the pellet production plants. The main pellet producers are shown in the following table.
Germany is the third largest wood pellet producing country world widely after United States and Canada. In 2013, the pellet production in Germany has reached up to 2.2r million MT, and 90% of which were made from the residues from timber mills.
Sweden is the second largest pellet producer, next to Germany in EU. In the recent three years, the wood pellet production in Sweden has being slowed down and has being replaced partially by importing from Baltic Region and Russia.
In 2013, France produced 890,000 MT wood pellets, which was driven by a strong demand of residential heating. In Australia, the trend also went up steadily. Australia has changed its role as a net exporter of wood pellets because of its increasing domestic demands for household heating production.
The pellets in Baltic Region and Portugal are mainly produced for exporting. The total amount of wood pellets has been up to 2.0 MMT in Latvia, Lithuania and Estonia in 2013, among which 1 MMT of wood pellets were produced by Latvia. Portugal has increased its production since 2008 and exported its pellets to United Kingdom and Denmark almost entirely.
As for consumption, EU is also the largest market. The total consumption in 2013 is 17.5 MMT and the major consumers of wood pellets in EU are UK, Italy, Denmark, Germany, Sweden, France, and Austria.
The EU pellets markets can be divided into three regions, the Italy, Germany, France and Austria region, the Sweden and Denmark region and the United Kingdom, Belgium, and Netherlands.
In Italy, Germany, France and Austria, pellets are used by private residential and industrial boilers in small scale. It is reported by European Pellet Council, the pellet demand for heat market grew 15% averagely in the recent 3 years. And the residential pellets consumption in Germany, Italy, and France is expected to grow, based on the sales of sales of boilers and stoves. The grow of residential pellet market is largely driven by the price of alternative fuels while the industrial pellets production is driven by EU Member State mandates and incentives.
In Sweden and Denmark, the wood pellet market is diversified. Wood pellets are widely used in households, medium sized district heating plants as well as in large CHP plants. Bothe Sweden and Denmark has a 2020 target for renewable energy use, respectively of 49 and 35 percent. In 2012, Sweden has realized its target set for 2020.
In United Kingdom, Belgium and the Netherlands markets, wood pellets are primarily supplied to large scale power plants, and only a small share is consumed by residential use. The boom of pellet consumption during 2011-2012 in UK was driven by the government founding. While the large scale use of wood pellets in the power plants is driven by the EU mandates for renewable energy use in 2020.
Following the three regional markets in EU, three trade flows are influential in the EU market. The Benelux countries and the United Kingdom imports pellets mainly from the United States and Canada. And also Denmark and Sweden import pellets from Baltic Region and Russia partially. Whereas the pellet market in Germany, Austria and Italy is more likely depends on self-supply, the production in the region itself.
In 2013, US. Exports 2.9 MMT pellets , which equivalents the value of 374 million US dollar, which was boomed by the demand of large scale power plants in the EU. If the trade flows remain consistent with current patterns, the United States will be the wood pellet supplier of the half of the demand, with the equivalent value of 600 million US dollar in 2015, and over 1 billion in 2020. Canada and Russia are also the significant exporters of wood pellets to EU.
Asian Wood Pellet Markets
The Asian wood pellet market is expanding steadily. Quantity of wood pellet exports from the Port of Prince Rupert, British Columbia, to Asia, which are directed to two sectional markets, the industrial energy sector, where pellets are co-fired with coat at power plants and in large boilers and the other is household heating market, where pellets are burned in pellet stove, furnace and other burners. The rising wood pellet markets in Asia comes into the attention of the world. The Asian demand in 2015 is likely to reach up to 3 million tons . In Asia, China, South Korea, and Japan are the three largest consumers.
Since its Renewable Energy Law has been enacted in January 1, 2006, China has put biomass fuel development as its top priority. Wood pellets is produced in large scale for replacing coal burning and the estimated wood pellet production was 800,000 metric tons in 2008, and 1 million tons in 2009 and the tendency is going up steadily. Wood Pellets is more cost-competitive in the Chinese market. In China, the wood pellets is largely used in power plants by co-firing with coal. Even though china’s wood pellet production is relatively small in volume at present comparing with other huge pellets producing countries, China as the second largest energy consumer has a great potential market for wood pellets.
According to related study, China has the potential to become the largest wood pellet market in Asia. China as a highly growing economics, its demand for energy is growing increasingly, and because of its sustainable development policy, its wood pellet market will be developed with priority. Even though China at present imports limited wood pellets from North America, Chinese wood pellets will be developed sustainably.
South Korea has taken aggressive steps to increase its renewable energy and aimed to increase renewable energy from the 2007 level of 2.4 percent to 11 percent by 2030. In 2009, about 30 000 tons of wood pellets was imported and 20,000 tons of wood pellets was produced domestically. In November 2013, South Korea wood pellet imports grew by almost 300% and in the first quarter of 2014 , the estimated imported volume of wood pellet is 280,000 tons and wood pellet demand will be increased to 5 million tons by 2020.
Because of the scarcity of natural resources, Japan largely relies on importing pellets from other countries, mainly from Canada, and also its domestic production is developing steadily. In 2009, Japan imported around 49,000 tons of wood pellets , which were mainly from Canada . Now, Japan is exploring the opportunities to imports pellets from Australia, Vietnam, Indonesia, the Philippines, Canada and U.S. In Japan, wood pellets are mainly used for home heating as well as for power generation. Even though the wood pellet market in Japan is at its starting stage, it is developing, which is the right time for pellet exporters to explore the market and develop business relationships.
Global Market Forecast
Global Potential wood pellet demand
Global demanding for wood pellets is growing in the recent years and whether it will keep to grow or not is forecasted by various studies, such as the studies by Poyry, Sikkema et al, Ekman& Co., Aebiom and New Eenergy Finance, etc.
According to the study of Poyry, EU alone will expect around 16.5 million tons of wood pellet in 2015 and 23.8 million ton by 2020 while AEBIOM estimated it would be between 50 and 80 million tons 2020, and whereas Sikkema et al forecasted that it would be up to 150 million tons by 2020 for the assumption that by the year of 2020, half of the heating boiler will be replaced, and the average co-firing rate in all coal power plant will be around 10% in EU. However, most of the studies forecast a modest growth, with an average of 3 % of wood pellets replacing of coal, despite the higher rate of 20% or more in individual plants. The following diagram will give you a clear understanding about the expected wood pellet demand in 2020 to 2025.
According to Poyry, the global demand for wood pellet will be increased strongly in EU and moderately in Northern America and few or marginal demand in Latin America, Africa and Oceania. While in Asia, the demand for wood pellets will be increased highly in Japan and South Korea and especially in China, with a big growth from 0.6 million ton to 10 million ton in 2020. From the perspective of global demand, 45 million tons of wood pellet will be demanded in 2020. The main conclusions of study on the global wood pellet demand will be as follow:
- Even though EU may remain to be the largest wood pellet consumer globally, East Asia is likely to grow up to be close second in 2020.
- Around 20 to 50 million ton of wood pellets are demanded in EU by 2020, depending on the co-firing policies in the UK, Netherlands, Germany, and Poland, and also depending on the heating oil price and amount of small scale users, such as, household users who switch to use wood pellets.
- Japan and South Korea will demands strongly in East Asian, which is affected by the policy development there. As for China, the wood pellet market is on its infant stage but with huge potential.
Global potential wood pellet production
As for the global potential wood pellet production forecast, there are two different assumptions based on the raw material resources, according to related studies. One is that the wood pellet production will be lower because of the scarcity of woody biomass, and the other is the wood pellet production will be increased highly because of the plantation of biomass crops.
Assumption: “wood pellet production will be as usual or lower”. The assumption is based on the statistics on the ongoing investment in new pellet plants all around the world and the statistics on the full production capacity of the plants and trades, which is believed by the writer to be realistic. The main assumption about the solid biomass supply availability from different regions is shown as the following diagram:
Seen from the above diagram, the overall potential available for import to the EU may increase drastically from about 42PJ in 2010 to over 280PJ(around almost 16 million tons) in 2020. The assumption is based on the existing projects, projects that under construction and projects planned to be built. As for the assumption, the uncertainty largely lies in the construction of pellet mill plant such as, the large scale pellet plant in Brazil and if the existing plants would continue till 2020.
Assumption: “wood pellet production will be higher”. The assumption is mainly based on the optimistic forecast that a number of world regions will take advantages on the use of land for energy crops production to produce more wood pellets. Based on the assumptions, the following additional sourcing areas are postulated in the assumption, shown in the following diagram, which can be compared with the above one.
In the assumption, an additional amount of 17 million tons of wood pellets will be produced in 2020, comparing with the diagram in the previous assumption, and the entire wood pellet production will be around 33 mill tons. What needs your attention is that it to some degrees, is arbitrary, however, it reflects the dominate position of Latin America, the rising of Sub-Saharan potential and the North-West Russia.
Challenges confront to sustainable pellet trade
According to the studies, the sustainable development of the global trade has confronted the following challenges:
1. Challenge to exploiting agricultural feed stocks for wood pellet production.
Because of the limitation of the woody biomass, the exploiting of agricultural residues as feed stock for pellet production is urgent. Agricultural residuals such as straws, peanut shells, and husks, and energy crops such as, miscanthus are very popular for pellet production. The exploiting of new materials such as, coffee husks, olive kernels, rape cakes, grass and grains, etc is one of the challenges confront to the sustainable development of wood pellet trade.
2. Challenge to logistics and transportation system
As the wood pellet trade goes to globally, the long distance trade in wood pellets has been challenging the logistic and transportations system world widely.
3. Challenge to refining the quality of pellets: torrefaction wood pellets
The quality improvement of wood pellet is another challenge for the sustainability of global wood pellet trade. Torrefaction of wood pellet is a technical challenge. The torrefied biomass will become hydrophobic and can be dried and stored easily. The torrefied biomass wood pellets will get its density doubled from 9 GJ per cubic meter up to 18 GJ per cubic meter, which will largely lower the transportation cost, and benefit the development of global wood pellet trade.
4. Transforming wood pellets into a global commodity
In global wood pellet trade, it is urgent and necessary to transform wood pellets into a global commodity. How to make it a global commodity? First, it is necessary to set up standardization, which needs huge amount of work. Secondly, the transparent prices and products will be necessary, which will encourage investments and the growth of the market.