Strong growth in Asian demand for pellets

In 2022, global pellet production grew by 4% compared to 2021, reaching a total of 46.8 million t, according to the 2023 Pellets Report published by the Brussels-based organization Bioenergy Europe. 44% or 20.6 million t were produced in the 27 EU countries, while North America accounts for 30.6% or 14.3 million tons of production output. With 10.8 million and 3.8 million t, respectively, the US and Canada are the world’s largest pellet producing countries, followed by Germany with an output of 3.6 million t in 2022. It has to be said, though, that North America predominantly produces industrial pellets, while the majority of German pellets are certified.

Canada’s production output remained unchanged compared to 2021. It is not yet altogether clear to what extent the wildfires in western Canada will impact the country’s pellet production in 2023.

Pellets to Asia instead of Europe

With a production output of 24.7 million t in 2022 (1,145 pellet mills), Europe has highlighted its important role on the global pellet market. In addition to number one buyer Great Britain, Japan and South Korea, too, have established themselves as important export markets for US pellets.

While the 27 EU countries increased their pellet production by 4% in 2022 (2021: 19.9 million t), production output in the rest of Europe fell by 22% or 1.1 million t, from 5.2 to 4.1 million t. One of the main reasons for this downward trend is certainly the war in Ukraine and the EU’s ban on pellet imports from Russia and Belarus which came into effect in July 2022. Russia has been one of Europe’s most important pellet manufacturers for many years, and Europe used to be the destination for a large part of Russian exports. In 2022, 2.5 million t of pellets were produced, compared to 1.8 million t in the year before. That corresponds to a decrease of 28%. An even bigger decrease was recorded in Belarus where output fell by 75% or 440,000 t to 142,000 t. In contrast, Ukraine remained very resilient despite the war, with a decrease of only 67,000 t to a total of 368,000 t.

With 5.8 million t of wood pellets (+10% year on year) produced in 198 pellet plants, Asia exceeded the previous record output of 5.6 million t which was achieved in 2019. However, Asian demand is still much higher than production. Japan and South Korea, in particular, use industrial pellets to generate electricity.

South Korea has become Russia’s new number one customer. In 2022, Russia exported 551,000 t to South Korea. Before the ban on imports came into effect, the country also shipped 414,000 t to Denmark and 131,000 t to Belgium. Other countries also recorded decreases in production volumes due to the geopolitical situation. In Latvia and Romania, production volumes each fell by 16% to 1.8 million t and 500,000 t, respectively.

Countries such as Indonesia (510,000 t) and Malaysia (791,000 t) have increased their output in 2022. The production volume of Vietnam, the world’s fourth largest pellet manufacturer, remained constant at 3.1 million t. In South America (especially in Brazil, Chile and Argentina), the production volume of wood and agricultural pellets grew by 29%, from 1.4 million t in 2021 to 1.8 million t in 2022. A large part of this volume is exported, as demand is stable at around 1 million t.

Europe as import region for industrial pellets

In 2022, global pellet consumption increased slightly by 1% year on year to 46.2 million t. The slight increase is due to the war in Ukraine and the sharp rise in pellet and gas prices at the time, which led to a decrease in sales and thus also in demand in the last four months of 2022.

In Europe, however, demand fell by 6%, from 35.5 million t in 2021 to 33.4 million t in 2022. The EU accounted for 24.2 million t (-2%), while demand amounted to 9.2 million t (-16%) in the rest of Europe. The largest importer in the EU is Germany with 3.2 million t, followed by Italy with 3 million t. Both countries import hardly anything bur certified pellets. Denmark and the Netherlands follow in third and fourth place with 3 million t each.

Great Britain remains the world’s main importing country, even though its demand – which is mostly satisfied through imports from the US – has fallen by 19% or almost 2 million t to 7.8 million t (2021: 9.6 million t). When it comes to industrial pellets, the EU is a net importer, mainly due to Denmark and the Netherlands. Denmark purchased 600,000 t from the US in 2022. 638,000 t were imported from Estonia, 426,000 t from Latvia, 258,000 t from Sweden and 205,000 t from Russia. Import volumes certainly did not only refer to industrial-quality but also to certified pellets, especially from EU countries.

Asian demand for wood pellets increased by 2.6 million t or 38% year on year and reached a total of 9.5 million t in 2022. This is due to the buoyant demand for energy of Japan’s and South Korea’s industry. In Japan, industrial pellet consumption rose from 2.9 to 4.6 million t and in South Korea from 4 to 4.9 million t. South Korea’s main supplier country is Vietnam with 2.1 million t, followed by Malaysia (406,000 t), Canada (329,000 t) and Indonesia (315,000 t). Vietnam is Japan’s most important supplier, too. Japan covers 54%, that is 2.4 million t, of its demand through imports from the Southeast Asian country. Canada (1.4 million t, 31%) and the US (303,000 t; 7%) follow in second and third place.