Production exceeds global consumption

In 2023, global pellet production was 2.6% higher than in the previous year (47.6 million t). Half of the pellets were produced in Europe, of which 20.6 million tonnes were produced in the 27 EU member states (42.3%) and 3.8 million tonnes in the rest of Europe (7.8%). The EU’s production was down by 1.8% year on year (2022: 21 million t). In the rest of Europe, it decreased by as many as 16% (2022: 4.5 million t). This downward trend in Europe can largely be attributed to Russia’s reduced production output. Before the EU sanctions came into effect, Russia sold around 3 million tonnes of mainly industrial pellets to Europe. In 2023, Russia only produced 1.5 million tonnes of pellets – compared to 2.1 million tonnes in 2022. For the past two years, Russia’s main foreign sales market was South Korea. With a pellet production output of 3.7 million tonnes, Germany was not only the largest producer in Europe, but also the third largest producer worldwide behind the US (10.8 million t) and Vietnam (4.7 million t). In Germany and almost everywhere in Europe, pellets were produced mainly to generate heat, while generating electricity was the main use of wood pellets in North and South America as well as in Asia.

The Top 3 exporting countries, i.e. the US, Vietnam and Canada, are followed by the two EU countries Latvia (1.8 million t) and Estonia (1.3 million t). The main buyers of industrial pellets were Great Britain and Denmark, and in the case of Estonia, the Netherlands as well. The third Baltic country, Lithuania, produced 530,000 tonnes and mainly exported premium-quality pellets for heat generation.

Worldwide, 1,623 pellet production facilities were operative in 2023, of which 847 or 52% are located in the EU, only 121 (7%) in North America and 263 (16%) in Asia, according to the Pellet Report 2024. 14.3 million tonnes were produced in North America last year, that is only 45,000 tonnes fewer than in 2022. Of this total quantity, 10.8 million tonnes (+3%) were produced in the US and 3.5 million tonnes in Canada (-9%). Canada exported almost 2 million tonnes to Asia, of which 1.7 million tonnes were sold to Japan alone. Exports to Europe totaled 1 million tonnes. The US exported only 1.4 million tonnes to Japan (14.6%) last year. 5.3 million tonnes (55.4%) were sold to Great Britain, 1.4 million tonnes to the Netherlands (14.9%) and 748,000 tonnes to Denmark (7.8%).

Asia booming thanks to industrial pellets

Vietnam produced 2.6 million tonnes of industrial pellets in 2022, mainly from acacia wood. In 2023, output totaled 4.7 million tonnes and was thus up by 78% or 2.1 million tonnes. Vietnam’s main sales markets were once again Japan and South Korea, where the pellets are used to generate electricity. In total, 8 million tonnes of pellets were produced in Asia last year, which corresponds to an increase of 36% compared to 2022 (5.7 million t). In China, output reportedly amounted to 873,000 tonnes in 2023.

In South America, 2.1 million tonnes (+14%) of pellets were produced last year, of which 1.9 million tonnes were produced in Brazil alone, followed by Chile with an output of 214,000 tonnes. In Africa and Oceania, production remained stable at 25,000 and 225,000 tonnes, respectively. 

Stagnating European demand for heat

At 30.1 million tonnes, European consumption decreased by 1.8 million tonnes or 6% compared to 2022. In North America, demand was down by almost 1%, totaling 2.2 million tonnes. In addition to rising energy costs, the main reasons for these decreases were the short heating season and an unfavorable subsidy policy for biomass heating systems in some EU countries, which led to a sharp drop in the number of pellet boilers sold, not only in Germany.

In Asia, pellet consumption more than doubled within three years. In 2020, demand amounted to 5.1 million tonnes. In 2023, it totaled 10.7 million tonnes. This corresponds to a 13% increase compared to 2022 (9.5 million t). Global consumption fell by almost 1% or 402,000 tonnes to 44.4 million tonnes in 2023. Of this total quantity, 22.9 million tonnes (52%) were used for electricity generation and 21.5 million tonnes (48%) to generate heat. In Europe, demand for wood pellets for private and commercial heat supply totaled 17.7 million tonnes (59%). In the EU alone, it was 16.9 million tonnes or 78% (2023: 21.8 million t). Domestic consumption in the US and Canada amounted to 2.2 million tonnes, 94% of which were used for heat supply. The industrial pellets produced in North America were almost exclusively intended for export. 97% (10.4 million t) of pellets in South Korea and Japan were used purely for electricity generation, as there are no combined heat and power (CHP) plants in Asia.

Demand in Great Britain, the world’s largest consumer of wood pellets, fell by another million to 6.8 million tonnes in 2023. The main reasons for this negative trend were changes in the political framework conditions, which prompted large plant operators, such as Drax, to reduce their consumption. The Top 3 consumers are completed by Japan (6.1 million t) and South Korea (4.6 million t). Germany (3.4 million t), the largest consumer of pellets in the EU, follows in fourth place. Denmark, the Netherlands, Belgium and Sweden recorded substantial decreases compared to 2022, certainly due to the closure and reduction of output of some (thermal) power plants in the past three years.

According to the European association Bioenergy Europe, Japan could become the world’s largest consumer of pellets and take that title from Great Britain. It remains to be seen to what extent technical problems and fires at some plants in recent years will slow down growth.