The costs of industrial wood pellets imported to multiple key European markets increased in 2022. Russia's current crisis has positioned the US in a highly strategic spot for imports.
The increase reflects several factors at play. And the lower spike in industrial prices reflects some optimism within the market.
70% of the total European industrial wood pellets import volume shipped to just four countries:
From a pricing point of view, imports saw cost jumps in most major reporting areas. The greatest price hikes occurred in Denmark and Belgium, with a 64% and 46% increase year-over-year, respectively (see table).
A few significant factors are contributing to these rises in prices:
Russia historically has the lowest-priced pellets supplying European nations. The boycott comes on the heels of the Russia-Ukraine war. The Russian market share fell from 74% of total import supply in 3Q 2021 to 0% a year later in 3Q 2022.
Without this lower-cost source, prices inevitably rose.
Much of the rise comes from longer-term supply agreements with US pellet producers coming to harvest. This, combined with the removal of Russia as a source, drove the US share from 32% to 50% between 3Q 2021 and 3Q 2022.
Russia's invasion of Ukraine has resulted in a sharp decline in shipments of pellets from Belarus, Russia, and Ukraine. As a result, the total volume from the three countries is likely to fall an estimated 35% in 2022 year-over-year.
Simultaneously, US pellet producers have increased their shipments to Europe. 2022 volumes are estimated at a record 8.6 million tons, up from 7.4 million tons in 2021.
This Market Insights report is an excerpt from Wood Resources International, a ResourceWise company.
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