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For the successful development of a pellet production project, having a well-defined pellet marketing strategy is paramount. Generally, there are three primary options for marketing pellets.
1. Marketing for local use in households, institutions or use in industry,
2. Marketing to Europe for use as domestic heating fuel,
3. Marketing to power plants in Europe or Asia for electricity generation.
Every market presents its unique challenges, and the choice of a specific market significantly impacts the available raw materials, quality standards to be met, and contracted production volumes.
This approach offers significant advantages such as low transport costs, lower risk, easier to manage liquidity as well as higher margins. It’s the favored approach of most pellet producers in Europe. In an African context, it also comes with the advantage of fewer restrictions on raw materials and lower quality certification requirements. However, a significant challenge arises from the “chicken and egg” problem: a local market often doesn’t exist until pellets are produced, which poses risks for investors. Potential solutions to this challenge include importing pellets to create a market before investing in production or focusing on industrial users to establish significant demand immediately with production startup. Developing a local market with pellet cookstoves can be especially rewarding due to high urban fuel costs and the high tolerance of gasifying cookstoves for varying pellet quality. Careful investigation is essential to clarify technical requirements for local commercial or industrial pellet use.
Marketing to European Domestic Heating Markets
Europe is increasingly relying on pellets for winter domestic heating as a cost-effective alternative to heating oil. However, these markets exclusively use wood pellets and have strict quality criteria, requiring ENplus certification. For more details see Pellet Quality. Successful entry into these markets can be facilitated by cooperation with traders experienced in European markets and international pellet shipments.
Marketing to power plants
There is a significant market for so-called industrial pellets, primarily consumed by power plants in Europe, Japan, and South Korea. Selling to the industrial pellet market offers the advantage of being able to sell large volumes to individual customers, reducing marketing efforts and costs considerably. Additionally, long-term offtake contracts can be established, serving as collateral for bank loans to finance pellet plants. Industrial pellets typically use wood as their primary raw material, making it challenging to market pellets made from agricultural residues. Strict sustainability criteria must also be met, necessitating proof of sustainable raw material sourcing. Furthermore, comprehensive documentation of energy consumption related to raw material sourcing, pellet production, and pellet transportation to customers must be provided. Currently, European power producers only accept pellets with SBP certification for this purpose. Japanese regulators are also currently discussing sustainability requirements that may lead to similar certification needs.
Traders assisting in marketing
If you are interested in international pellet trade, whether for power plants or domestic use, it is strongly recommended to collaborate with experienced international traders. The following companies are involved in international pellet trading.