In July, when EU sanctions took effect, South Korea became the sole export destination for Russian wood pellet manufacturers. However, the volume of pellets shipped to this country cannot compensate for the reduction in supplies to Europe.

In November 2022, Russia tripled its fuel pellet exports to South Korea to 65,000 tonnes compared to 2021. The value of these exports, according to data from Lesprom Analytics, rose to 11 million US dollars, with the average price of Russian pellets at 180 dollars per tonne. In the first eleven months of this year, Russian pellet producers shipped approximately 377,000 tonnes of pellets to South Korea, with a total export value of 69 million US dollars. In 2022, Russia's wood pellet exports to the European Union will be one million tonnes lower, with a value of 189 million US dollars. For comparison, last year Russia exported approximately 2 million tonnes of wood pellets to Europe, generating about 320 million US dollars.

“Transporting pellets to the East (for Russian companies) is much more expensive than to the West; logistics 'eat up' all the profit,” said Olga Rakitova, Director of the Russian National Bioenergy Community.

Meanwhile, demand for wood pellets in Europe is steadily increasing. The volume of wood pellet imports into the European Union in October 2022 increased by 5.1% compared to the previous year, reaching 494,000 tonnes.

The main suppliers of wood pellets to Europe are the USA (348,000 tonnes), Ukraine (61,000 tonnes), and Turkey (26,000 tonnes). In October, US exports increased by 90% compared to the previous year. Thus, US supplies have fully replaced Russian pellet exports to Europe. At the same time, Ukraine moved from fourth to second place in terms of fuel pellet supplies to the EU.

Under the fifth package of sanctions, Russian pellet exports to Europe were completely halted from July 10. However, difficulties with Russian wood pellet supplies to Europe began on April 8, when the FSC revoked trade certificates for Russia and Belarus. A week later, the ENPlus certificates used in the consumer market ceased to be valid. Following this, European companies began refusing to purchase Russian pellets.

Given the cessation of Russian pellet exports to the EU, the world's largest wood pellet producer, Enviva Inc., announced the signing of a ten-year contract with a European client. From 2027, the company will supply an additional 800,000 tonnes of industrial fuel pellets to Europe annually. According to information provided by Enviva, its total contracted revenue reached more than 23 billion US dollars by the end of the year.

By stopping wood pellet exports to the EU, Russia faced difficulties with waste disposal at sawmills

As there was no demand for wood pellets on the domestic market, Russian companies began to suspend pellet production facilities.

“Many factories announced a production halt,” explains Olga Rakitova. “But in reality, it is the closure of companies. And there will be no return to the previous situation.” As a result, according to data from the Russian Federal State Statistics Service, wood pellet production in Russia decreased by 18% in January-October 2022, to 1.8 million tonnes. By the end of the year, the decline in production intensified, reaching 30% in October.