PELLET market overview

Pellet 2020, Uppsala

4th February

Pellets are not only good to produce heating, cooling, electricity

John Swaan, FutureMetricsWPAC Conference October 2019, Ottawa

Common voice of European bioenergy for the past 26 years.

30 national associations and 90 companies from Europe.

Umbrella organisation for the European Pellet Council & International Biomass TorrefactionCouncil.

Aiming at a sustainable bioenergy market based on fair business conditions.

Who we are

https://www.youtube.com/watch?v=mgCIKGIYJ1A

I.Global trends & industrial market

Global trends & Industrial marketHighlights

§ Asia is taking the lead in pellet production and use

§ The global pellet supply & demand balance is very tight

§ Situation improved recently

§ Short sighted market - Storage is key!

Country highlight

Germany, the next big industrial user of pellets?

Global trends & Industrial marketWorld pellet map and trade flow 2018 (million tonnes)

Global trends & Industrial marketIndustrial wood pellet demand: Asian lead

05

10152025303540

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Oceania

Other Asia

South AmericaNorth America

Other EuropeEU28

Global trends & Industrial marketMarket tightness

Source: Bioenergy Europe Pellet Outlook 2019

BUT Global industrial pellet production capacity has failed to keep pace with demand

Source: Hawkins Wright

Evolution of pellet production in the world (million tonnes)

Unlock potential of South America and Africa?

Development of Argus wood pellets 90 day Index cif NWE USD/t (Jun 2017 – October 2019)

Global trends & Industrial marketMarket tightness

Global trends & Industrial marketMarket tightness - recovery

Global trends & Industrial marketShort sighted industry

Global trends & Industrial marketFuture trends

Coal phase out

By 2038 the latest

Climate protection programme 2030

§ CO2 tax - 10 EUR/t CO2 in 2021 to

35 EUR/t CO2 in 2035

§ RE in Heating and cooling

=> Pellet offers a great solution!

Global trends & Industrial marketGermany: next big industrial pellet user?

II.European Pellet Production

§ Well widespread all over Europe, creating value, contributing to rural

development.

§ Very dynamic industry, several leading countries are rather new in the industry.§ Lack and price of raw material are the main concerns.

Countries highlights

§ Balkans countries: count all together for more than 1,1 million tonnes.

§ Baltic and Nordic countries: Increasing decentralised small production plants.§ Russia: the rising star?

European pellet productionHighlights

European pellet

production is very

well widespread all over Europe,

creating value, contributing to

rural development

European pellet productionEvolution of pellet production in the top 10 largest European producers (tonnes)

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000

3 000 000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

DE SE AT PTSource: Bioenergy Europe Pellet Outlook 2019

Very dynamic

industry, several

leading countries

are rather new in

the industry

European pellet productionEvolution of pellet production in the top 10 largest European producers (tonnes)

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

RU LV FR PL EE ESSource: Bioenergy Europe Pellet Outlook 2019

Very dynamic

industry, several

leading countries

are rather new in

the industry

European pellet productionEuropean pellet producers’ perception of the main difficulties 2018

Lack and price of raw

material are the main

concerns on European level

(1: least difficult to 5: most difficult)Source: Bioenergy Europe Pellet Outlook 2019

European pellet productionEvolution of pellet production in the Balkans countries (tonnes)

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

AL BA HR ME RS SI Total

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Production is the Balkans was more than 1,1 million tonnes in 2018

Source: Bioenergy Europe Pellet Outlook 2019

European pellet productionMove towards smaller and decentralised production plants

BALTICS AND NORDICS STATES§ Many sawmill owners in established

markets are deciding to enter the pellet business rather than have large producers dictate prices for raw materials

§ Containerized production units can be erected in just a few weeks

§ Pellet quality is perfect for the European residential market

Russian Pellet Council

European pellet productionRussia - future leader of pellet production in Europe ?

Bottlenecks

§ Infrastructure

§ Logistic

§ Business relations

European pellet productionRussia - future leader of pellet production in Europe ?

III.European Domestic Pellet Use

Domestic market§ No only using A1 pellets§ Potential for further growth is still intact - unexpected leaders

Commercial sector: sleeping giant

Country highlight§ France: the rising star of domestic market§ Baltic: increase of local pellet use§ Italy: decrease of stoves sales§ Austria: increase of boilers sales§ Germany: great conditions

European Domestic Pellet UseHighlights

European Domestic Pellet UseEvolution of Europe’s top 5 countries for residential (<50 kW) pellet consumption in Europe (tonnes)

28

European Domestic Pellet UseEvolution of Europe’s top 5 largest growing market (between 2013-218 in absolute terms) residential (<50 kW) pellet consumption in Europe (tonnes)

29

European Domestic Pellet UseEvolution of Europe’s top 5 largest growing market (between 2013-218 in relative terms) residential (<50 kW) pellet consumption in Europe (tonnes)

Estimate of pellet quality class shares for residential heat market in European country in 2018(%)

European Domestic Pellet UseAll the heating markets are not exclusively using A1 pellets

Source: Bioenergy Europe Pellet Outlook 2019

European Domestic Pellet UsePotential for further growth is still intact

Average percentage of household with pellet stoves in 2018 in some European countries (%)

Average percentage of household with pellet boilers in 2018 in some European countries (%)

Source: Bioenergy Europe Pellet Outlook 2019

Commercial marketSleeping giant

European Domestic Pellet UseFRANCE - the rising star

Perfect market conditions• Carbon tax (see left chart)• Tax reduction + subsidy for heating

appliance installation• Heating oil boilers phasing out plan

1.000.000 boilers to be replaced in 5 y

33

Boilers

Stoves

162.000

Annual sales of pellet heating appliances Annual sales of domestic pellet boiler

+ 35%6900 boilers

34

Nber of units

Nber of units

European Domestic Pellet UseFRANCE - the rising star

European Domestic Pellet UseBaltic - Increase of local use

Latvia - domestic useAbove 200.000 tonnes/a

Source: www.stuv.com

European Domestic Pellet UseItaly - Disappointing sales

• Decreasing patterns confirmed

• Appreciable recovery in the second semester (in %)

• approx. -9% units sold in 2019, compared to 2018 (180.978)

• Better selling patterns on foreign markets

Pellet stove market

Age of installed appliances in 2018

Great potential in replacing equipment

European Domestic Pellet UseAustria - Signs of hope!

425

1.321

2.128

3.466

4.9324.492

5.193

6.077

8.874

10.467

3.915

11.101

8.446 8.141

10.400

11.971

10.281

6.209

5.0294.320

5.118 5.110

6.900

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20112012

20132014

20152016

20172018

2019

Annually installed residential pellet boilers in Austria (Boilers < 100kW)

Source: DI Herbert Haneder, Landwirtschaftskammer NÖ; estimation 2019 and graph proPellets; Jan 2020

European Domestic Pellet UseGermany - Great market conditions

Thank you

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Next webinar on bioenergy statistics:14 January 2020 4pm CET