Pellets: are the skyrocketing prices justified or are producers taking advantage of them?

Pellets: are the skyrocketing prices justified or are producers taking advantage of them?
Pellets: are the skyrocketing prices justified or are producers taking advantage of them?
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A difficult autumn-winter awaits us due to higher energy and gas prices. However, the costs of pellets are also skyrocketing. Are the increases justified or are producers taking advantage of the crisis a little?

@ olegdudko / 123rf

Thanks to the bonuses, with which it is possible to pay (at least in part) for one’s own pellet stove and frightened by the large increases in gas and energy prices, many families have decided to opt for this more sustainable type of heating. The prices, however, as the demand has increased a lot and due to other issues, have skyrocketed.

This situation is obviously taking place not only in Italy and there are those who are wondering if the price increases are due exclusively to the difficulties of the producers or if, in reality, they are taking advantage of the crisis to make a profit.

The consumer magazine 60 Millions de Consommateurs in France takes stock of the situation of pellets, after receiving a series of reports from its readers, such as that of Pierre who wrote:

We have converted our oil boiler into a pellet boiler. We bought the pellets of 66 15 kg bags [cioè quasi una tonnellata] at the price of 297 € in December 2021. In July, the price of this same pellet went up to 495 €, an increase of 67%! Are producers taking advantage of the crisis to line their pockets?

Why has the cost of pellets increased so much?

To answer this question in France is Eric Vial, general delegate of Propellet France, the association of pellet heating professionals, who said:

To produce a ton of pellets, we currently have an additional cost of 100 to 120 euros, linked to thegeneral increase in energy and the price of sawdust processing (raw materials, etc.).

But this is not the only reason, there are two others:

  • The soaring demand: in 2021 the installation of pellet stoves increased by more than 40% and that of pellet boilers by 120%, thanks to state aid and energy suppliers (energy savings certificates)
  • The energy choices of some local authorities: those who have so far used pellets as auxiliary heating now want to completely renounce gas to heat 100% with pellets and this creates an even greater demand that the industry struggles to meet

Then there is the interruption of pellet deliveries by Russia, Belarus and Ukraine which, the French experts write, created a deficit of 3 million tons in Europe. But all this is not enough to explain the increase in prices observed in France: this country in fact produces as much as it consumes (or almost), obviously only as long as demand was at acceptable levels.

So what else affects prices?

Excess inventory drives prices up

As Eric Vial stated:

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Due to the high demand, we have to import 15 to 20% of our pellet consumption, at very high prices. People stock up and deprive other consumers. According to professionals, a bubble was formed, which made prices artificially high. According to our projections, we could meet the demand, which was supposed to increase by 15%. However, currently, sales have increased fivefold and we cannot follow up. Some distributors don’t hesitate so to raise their prices to discourage overstocking. A perfectly accepted abuse.

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In Italy the situation – if possible – is even worse. As the Italian Agroforestry Energy Association (AIEL) we interviewed explained to us:

Italy is particularly dependent on pellet imports, which prevail over national production. The Italian market is therefore exposed to the uncertainties and dynamics of international markets, which are the basis of current market conditions, characterized by price increases and uncertainties about supplies.

Will there be a shortage of pellets this winter?

The situation is certainly not rosy. The sector expects to produce an additional 1 million tonnes between 2021 and 2024, doubling its production capacity by 2028 but, in the meantime, shortages could actually arise during the coming winter.

As Xavier Mahieu, CEO of the Brazeco brand said:

In France, pellet factories are no longer accepting new customers and are no longer able to meet the demand of their long-standing customers. Domestic log suppliers also limit their customers on deliverable quantities. The winter season is likely to be very complicated.

A similar situation is therefore to be expected in Italy as well. Despite this, the French experts are keen to emphasize that pellet heating remains by far the cheapest way, compared to electricity or gas.

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Source: 60 Millions de Consommateurs

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The article is in Italian

Tags: Pellets skyrocketing prices justified producers advantage

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