After that Baltpool recorded the highest woodchips and pellets prices ever in the Lithuanian market, prices slumped slightly during trading on January 25, 2022. Gustav Melin, CEO of the Swedish Bioenergy Association (Svebio) explains some of the drivers behind the continued high price levels in Lithuania.
At the close of Baltpool’s weekly trade, prices for pellets averaged EUR 39.45/MWh while for woodchips (delivered to heating plants) prices averaged EUR 25.65/MWh.
The background to high pellet prices is primarily the high prices on natural gas, coal, and emission rights (Emission Trading System – ETS) which have made pellets the most profitable fuel to use in condensing power production. Pellets have had this cost advantage since October 2021, and power utilities that have the possibility to use pellets have also tried to do so. However, available pellet volumes on the market are dwindling since production capacity is currently fully utilized to meet demand, explained Gustav Melin.
At a European Pellet Council members meeting held on January 18, 2022, national pellet organizations stated that customers are receiving pellets to a sufficient extent in all countries.
The situation is most strained in France, where production has decreased due to a fire at a pellet plant while consumption has increased as customers who can switch from fossil fuels have switched to pellets whenever it has been profitable. Should the weather get colder and the market gets tighter, several countries may resort to supply rationing by limiting the size of deliveries so that all customers receive pellets, Melin said.
According to Melin, most of the pellet organizations foresee an increased demand in their countries in the coming years, and to meet this demand, additional pellet production capacity – both Austria and France expect new capacity additions during 2022-23, totaling over 600 000 tonnes if all planned projects by association member companies are realized.
Belarus blues behind price push
Woodchips though are a different story with prices in Lithuania now the highest ever recorded by Baltpool, around EUR 25/MWh. Prices in neighboring Latvia had lagged behind but have since caught up and are now on par with Lithuania.
Woodchip suppliers who signed longer supply contracts at lower price levels and are low on stocks are now being forced to buy fuel at a higher price while trying to renegotiate contract agreements to avoid bankruptcy, Melin explained.
High energy prices in Europe are one driver for the high woodchip prices in Lithuania. However, another driver specific for Lithuania is that woodchip supply from Belarus, which accounted for a large market share, has largely been absent.