Wood Pellet Production
After 12 years of continuous growth, wood pellet production in Serbia recorded a decline for the first time in 2018, falling by 1.3%. Production decreased among most large producers, mainly because production was suspended during January and February due to high inventory levels caused by a sharp increase in pellet imports in the second half of 2017, as well as the introduction of tariffs in Kosovo on goods from Serbia and Bosnia and Herzegovina.
Although the decline was not significant, there was considerable dissatisfaction among domestic producers because no action had yet been taken regarding the introduction of regulations requiring mandatory quality testing of pellets imported into Serbia. This was particularly important given that Serbian producers were required to hold appropriate certificates and test reports when exporting their pellets to other countries, especially EU markets.
Wood Pellet Exports
Due to accumulated stocks at the end of the 2017/2018 heating season, domestic producers began signing contracts with distributors from Italy, Slovenia and Greece as early as the first quarter of 2018, allocating significant quantities of their pellets for export. In this way, they protected themselves against potential instability in the domestic market during the following heating season.
This contributed significantly to renewed growth in Serbian wood pellet exports, which reached 92,051 tonnes in 2018, approaching the milestone of 100,000 tonnes. Compared with the previous five years, this represented the highest export volume. One of the reasons exports doubled in 2018 was the “crisis” in the domestic market caused by the sharp increase in pellet imports, particularly from Ukraine, during 2017.
The value of Serbian wood pellet exports reached USD 16.9 million in 2018, representing a 2.2-fold increase compared with 2017. The most important export markets in 2018 were North Macedonia and Italy. Together, these two countries accounted for 73% of the total value of wood pellet exports, with North Macedonia accounting for 46.5% and Italy for 26.5%.
A total of 44,680 tonnes, worth USD 7.8 million, were exported to North Macedonia, representing an increase of 35% compared with 2017. The increase in wood pellet exports to North Macedonia was the result of growing consumption in the country and the inability of domestic producers to meet this demand through their own production. However, the tariffs imposed in Kosovo on goods from Serbia and Bosnia and Herzegovina were also an important factor in the growth of pellet exports to North Macedonia, due to their re-export to Kosovo.
Wood pellet exports to Italy increased 3.2-fold in 2018, reaching 21,920 tonnes with a value of USD 4.4 million. However, the largest increase in pellet exports in 2018 was recorded in Slovenia, where exports grew elevenfold. In 2017, only 740 tonnes of pellets were exported to Slovenia, while in 2018 this figure reached 8,233 tonnes, worth USD 1.5 million.
A similar trend was recorded in exports to Greece, which increased from 808 tonnes in 2017 to 6,220 tonnes in 2018. Slovenia accounted for 9.0% of the total value of Serbian pellet exports, while Greece accounted for 6.5%.
The average export price in 2018 was USD 184 per tonne, USD 2 higher than the average export price in 2017, but still significantly below the record level of USD 212 per tonne achieved in 2014. The highest average export price was achieved on the Italian market at USD 204 per tonne, indicating that only the highest-quality pellets were exported to this market. Slovenia followed at USD 186 per tonne, Greece at USD 178 per tonne and North Macedonia at USD 176 per tonne.
Wood Pellet Imports
Following record pellet imports in 2017, imports fell sharply in 2018 to 25,565 tonnes, almost three times lower than in the previous year. Ukraine remained the leading source of imports in 2018, with 9,935 tonnes worth USD 1.36 million, accounting for 38.8% of total imports.
Ukraine was followed by Bosnia and Herzegovina with 5,290 tonnes, Croatia with 4,977 tonnes and Montenegro with 4,323 tonnes. Together, these four countries accounted for almost 96% of total wood pellet imports into Serbia, showing that the share of other countries was relatively small.
The average import price of wood pellets from Ukraine in 2018 was USD 137 per tonne, which remained very low compared with the average prices of pellets imported from other countries. The average import price from Montenegro was USD 150 per tonne, from Bosnia and Herzegovina USD 157 per tonne, and from Croatia USD 186 per tonne.
Compared with 2017, when the average import price of pellets from Ukraine was USD 113 per tonne, the average import price in 2018 increased by USD 24 per tonne. This in itself indicates that import prices in 2017 were unrealistically low.
The import of pellets into Serbia and their distribution through retail outlets continued without any requirement for importers and distributors to test their quality. An initiative by leading producers, submitted through the Serbian Chamber of Commerce to the relevant ministry, calling for the adoption of regulations governing the quality of wood fuels, had still received no response.
Consumers were therefore advised to check whether the pellets offered to them carried an ENplus certificate. The situation regarding ENplus certification improved slightly compared with the previous year, with the number of domestic producers holding this certificate increasing by one, reaching a total of seven at the beginning of 2019.
Wood Pellet Prices
The overall situation in the wood pellet market also had a significant impact on retail pellet prices. Compared with the final quarter of 2017, retail wood pellet prices in the final quarter of 2018 were between 2.2% and 6.6% lower, depending on the region and the supply conditions of retail outlets.
Expectations were that prices would increase slightly during 2019 due to rising consumption in numerous public buildings included in the Government’s programme to replace old, inefficient heating systems using coal, heavy fuel oil and heating oil with new, efficient biomass heating systems, particularly those using wood pellets.
Written by Dr Branko Glavonjić, Full Professor at the Faculty of Forestry, University of Belgrade