Baltic wood pellet producer enters heating markets

Spanish Market: Biomass
31/05/13

London, 31 May (Argus) — Latvia-based industrial wood pellet producer Latgran is ready to ship its first cargo of higher-quality heating pellets after completing a successful testing phase, the company told Argus.

Latgran will ship a 4,000t cargo, most likely next week. The pellets, which the firm describes as “mid-market”, contain no more than 0.7pc ash — lower than the maximum 1.5pc ash in I2 specification industrial pellets, but slightly above the 0.5pc required for premium residential volumes.

“We are not targeting residential-quality pellets,” Latgran part owner and sales director Kenneth Eriksson said. “There is a growing market for this type of mid-market pellet. We see large demand in smaller heating plants and commercial-scale installations — particularly in Scandinavia and Germany.”

The first cargo consists of 6mm pellets, but the company will also produce 8mm pellets to serve the requirements of different clients.

Latgran will produce these mid-market pellets alongside its regular industrial volumes, Eriksson said. The volumes produced will depend on the raw materials available — higher-quality pellets require higher-quality raw materials — but the company expects to produce several cargoes this summer and into the next heating season.

“We currently have enough raw materials for at least another cargo,” Eriksson said. “We see this market growing substantially, and it makes sense for us to have a presence in this market to diversify our risk. We have proven during testing that producing these pellets will not affect our normal industrial operations.”

Mid-market pellets were earning at least a €10/t ($13/t) premium to industrial-quality pellets in winter 2012-13, according to Eriksson.

“The market will decide what price these pellets will fetch this winter, but if the demand for this type of pellet is as strong as it was last winter, we expect a premium [for mid-market pellets to industrial-quality pellets],” he added.

Latgran, which is jointly owned by Swedish firm Korsnas and Finnish firm Baltic Resources, has a total production capacity of around 450,000 t/yr at three plants, and plans a fourth plant that will increase its capacity to around 600,000 t/yr.

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