As a player in the national and international biomass market, the Brüning Group is committed to the sustainable and efficient utilisation of wood pellets. With our focus on the German and European markets, in particular the United Kingdom, France and Italy as our core markets, we closely monitor developments and trends in the industry.
According to a revised forecast for 2024, global demand for pellets is estimated at 49.4 million tonnes worldwide, of which 33.9 million tonnes will be in Europe.* This means that consumption of wood pellets will continue to grow in this difficult year, albeit not as strongly as previously hoped. Global consumption of pellets is growing in all sectors, including this year, by around 5 million tonnes compared to the previous year. The sub-market for industrial pellets in particular is expected to consume only 15.4 million tonnes in Europe, which is significantly lower than previously expected. The market for heating pellets continues to develop stably with an expected consumption of 18.5 million tonnes in Europe. Reasons for this include higher production in CfD-fuelled plants in the UK and subdued demand in other European power plants due to a large number of planned and unplanned outages.
In contrast, the supply of wood pellets remained largely stable in the second quarter of 2024, with a total capacity of 70 million tonnes per year and 6.2 million tonnes of capacity under construction or financed. High stock levels at pellet plants and low interest on the spot market dampened production in all regions. In addition, the lack of new long-term purchase agreements from Europe is slowing down project development.
The imbalance in supply and demand for 2024 is reflected in an expected oversupply of up to 1.8 million tonnes, which could lead to lower capacity utilisation at pellet plants, particularly in more cost-intensive regions, and sent prices plummeting further in the past six months. In the first quarter of 2024, wood pellet imports in Europe rose by 3% year-on-year to 4.6 million tonnes.
Spot prices for industrial pellets in Europe continued their downward trend, influenced by high stock levels at both producers and power plants. The same applies to the premium pellets segment for the heating market. The forecast for spot prices next winter has been revised downwards, but an upturn is expected from the summer onwards. Sufficient supply on the heating market means that no sustained price increase is expected in the second half of the year. Lower production costs in Central Europe are helping to keep prices stable.
In Germany, sales of heating systems fell significantly in the first quarter of 2024. According to the Federation of German Heating Industry, sales of biomass boilers fell by 81% compared to the previous year, while sales of pellet boilers fell by 86%. Overall, sales of heating systems fell by almost 30 %. This development is surprising, as the German government significantly increased subsidies for pellet boilers from January 2024. However, the positive effects of these increases are not yet visible, presumably due to complex application procedures and administrative challenges.
Pellet production in Germany reached a record high of 908 kt in the first quarter of 2024, an increase of 6% compared to the previous year. However, sales of pellets in bags fell to 20% of the total volume, compared to 30% in the previous quarter. This is attributed to the changing purchasing behaviour of consumers, who are buying in smaller quantities in the hope of purchasing larger quantities later in the year. Lower production is expected for the second quarter of 2024, similar to the level of the second quarter of 2023.
In France, the planned conversion of coal-fired power plants to pellets has been delayed due to economic concerns and a lack of operating subsidies. French production fell by around 15% in the first quarter of 2024 compared to the previous year.
These developments, together with production cutbacks and high stock levels in pellet plants, are having a significant impact on the market. We are constantly monitoring market movements and flexibly adapting our strategies in order to make the most of opportunities and successfully overcome challenges. Our aim is to develop innovative solutions that enable us to offer our customers the best possible service and high-quality products at all times.
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* The data and content given here are based on the following source: HAWKINS WRIGHT, The Outlook for Wood Pellets – Demand, Supply, Costs and Prices; Number 38 – Second Quarter 2024