{"id":78994,"date":"2020-04-03T07:49:46","date_gmt":"2020-04-03T07:49:46","guid":{"rendered":"https:\/\/tin.happy-projects.ro\/raw-material-supply-wood-pellet-industry-causes-concerns-many-sawmills-closing\/"},"modified":"2025-09-19T08:52:59","modified_gmt":"2025-09-19T08:52:59","slug":"raw-material-supply-wood-pellet-industry-causes-concerns-many-sawmills-closing","status":"publish","type":"post","link":"https:\/\/www.timberindustrynews.com\/ro\/raw-material-supply-wood-pellet-industry-causes-concerns-many-sawmills-closing\/","title":{"rendered":"Raw material supply for wood pellet industry causes concerns as many sawmills are closing"},"content":{"rendered":"
\n

Expectations of a downturn in sawmill activity \u2014 a likely result of the ongoing coronavirus pandemic \u2014 has prompted concerns over wood pellet raw material supply and stalled discussions for winter 2020-21 deliveries.<\/em><\/span><\/p>\n

A decline in timber demand, as a result of the coronavirus outbreak, could prompt a decline in sawmill activity in the Baltics, North America and central Europe. Sawmill residues are a key wood pellet raw material, and a spate of closures would likely increase wood pellet production costs.<\/p>\n

\"The closure or downturn at sawmills in the Baltics over the coming weeks is inevitable,\" Danish trading firm Copenhagen Merchants' chief operations officer, Michael Christensen, said.<\/p>\n

\"The raw materials situation in the Baltics is deteriorating,\" Swedish utility Vattenfall trader Rob Marcus said. European economies are slowing down forcefully, and the demand for lumber and wooden products is falling, meaning that a shortage of forestry and processing by-products is looming, he said.<\/p>\n

\"Some of the smaller [Baltic] sawmills have already reduced production or, in some cases, shut down operations, with demand falling. And it is anticipated that some of the larger sawmills will follow suit within the next one or two weeks,\" Estonian renewable company Enefit Green trader Siim Liblik said.<\/p>\n

Some sawmills have said they will remain open, and those with some business serving the Asia-Pacific market may continue to operate as normal as demand there recovers, Danish utility Orsted trader Janis Krastins said. But those with business predominantly in Europe are likely to be affected.<\/p>\n

While a solution for some Baltic wood pellet producers will be increase purchases of roundwood, an alternative raw material, such a solution is likely to be more available to larger pellet producers with greater cash flow. And the quality of the raw materials could decline, which may result in restrictions on traditional trade flows into the UK, Denmark and the Netherlands, Liblik said.<\/p>\n

A downturn in Baltic sawmills' output and residue availability would directly affect wood pellet production in the region. Trade discussions for winter 2020-21 deliveries have halted as a result of the uncertainty, with producers considering raw material availability and costs.<\/p>\n

\"The uncertainty created must result in some form of price risk to be added to the cost of pellets,\" Swedish utility Vattenfall trader Tom Halstead said.<\/p>\n

\"It is likely that when discussions do finally take place for next season, producers will look to protect themselves by offering conservative volumes as part of winter contacts,\" Liblik said.<\/p>\n

Meanwhile, European buyers have yet to increase their winter 2020-21 bid levels, given the ongoing decline in spot prices and expectations that wood pellet spot supply will continue to outpace demand in the coming months. The Argus cif northwest European spot wood pellet price fell to a 30-month low of $155.86\/t on 26 March.<\/p>\n

The impact of the sawmill closures is not likely to lift wood pellet prices until winter 2020-21, given high stock levels across Europe. But emerging concerns over raw material supply is starting to work their way into discussions along the curve and could halt the decline in wood pellet pricing expectations for the winter season, participants said.<\/p>\n

\"The momentum in the market has changed. The thought process for next winter has reversed in a matter of weeks,\" Christensen said.<\/p>\n

Biomass market participants also voiced concerns about the sawmill markets in the US and Canada. Canadian wood pellet producers are particularly reliant on sawmill residues for their feedstock. Canadian pellet producer Pinnacle Renewable Energy, which has seven pellet production facilities in British Columbia (BC), with a combined 1.52mn t\/yr of capacity, was affected by shutdowns and restrictions at sawmills in BC during the third quarter of last year. The BC timber industry faced several constricting factors, including the mountain pine beetle epidemic, wildfires and weakening lumber prices.<\/p>\n

\"If the situation in Canada and the US escalates, there will be no relief available from the Baltics like there has been in the past,\" Liblik said.<\/p>\n

While Europe's wood pellet supplies look to remain plentiful throughout the summer, curtailing the likelihood of any sharp near-term impact, the results of a slowdown in sawmill output are anticipated to be increasingly evident in the winter of 2020-21. In many cases, countrywide lockdowns caused by the viral outbreak are in their infancy and the global outlook changes daily. The uncertainty this has created has left the wood pellet market casting a cautious eye at the coming winter.<\/p>\n<\/div>\n

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Expectations of a downturn in sawmill activity \u2014 a likely result of the ongoing coronavirus pandemic \u2014 has prompted concerns over wood pellet raw material supply and stalled discussions for winter 2020-21 deliveries. 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