Pellet prices set to peak as district heating costs rise modestly

Pellet prices are expected to reach a peak at the start of the heating season, while district heating costs are forecast to rise by only a few percent, ERR reported.

Wood pellet prices are currently higher than they were a year ago, and producers expect them to increase further in the near term.

“The current high pellet price is mainly due to a shortage of raw materials and strong export pressure, as demand is high,” said Mart Liivak, chief executive of Harju Puu. He added that higher energy prices would affect prices in winter.

According to Liivak, demand has risen sharply because of increased exports, mainly to Poland. As a result, prices have not fallen seasonally this summer as they usually do.

Mark McConnell, a board member of Graanul Invest, said the main reason for the price increase was strong competition for raw materials, as the wood industry does not operate at full capacity during the summer.

He said homeowners were replenishing their winter stocks and distributors were filling their warehouses to lock in prices. McConnell expects prices to peak soon and then fall as the wood industry becomes more active and waste materials become available.

A 1,000-kilogramme supply of pellets currently costs retail consumers between 370 and 400 euros. The price of ordinary firewood has not increased as sharply, although it has also risen from year to year.

“Taking raw firewood in the middle of summer, drying it yourself and storing it yourself is still unquestionably the cheapest heating solution,” Liivak said.

Because more than 60 percent of the fuel used to produce district heating is wood, changes in wood prices also affect district heating charges. However, Siim Umbleja, head of the Estonian Association of Power Plants and District Heating, said fuel was only one part of the costs involved.

He said district heating had remained relatively affordable in recent years but forecast a price increase of a few percent. The average apartment paid about 70 euros per month for district heating last year, Umbleja said, adding that a few percent more would not necessarily represent a significant additional cost.