The cost of transatlantic freight for vessels carrying industrial wood pellets and chips has been falling from the beginning of the year and reached $ 175.8/t. However, analysts claim that in the 4th quarter the price will recover to the indicators of the end of 2013.
Thus, the cost of transatlantic freight for vessels fall to $ 179/t in March compared to $ 183/t in the previous month. This is due to decline in demand for industrial wood pellets and chips on the market that is traced in the beginning of 2014 in comparison with the previous year.
Therefore, with small demand for wood granules and availability of a large number of the vessels wishing to provide services for shipping there is a situation when competing among themselves shipowners are forced to reduce the prices for the services.
In particular, there were a large number of vessels available off the US Gulf coast and the east coast of Brazil in the Handysize (25,000 t lots) and Supramax (45,000 t lots) markets.
However, experts predict that the cost of freight for vessels by the end of the year will tend to increase and reach just above $ 185/t.
The analysts of Ukrainian Biofuel Portal pellets-wood.com attribute this to the fact that over the next few years is expected to increase the supply of pellets to Europe from USA and Canada to 7 m tons, which currently is about 4 million tons. It is known that the main importers of biofuel from these countries are UK, the Netherlands and Belgium. There is some amount of pellets from USA in Denmark, Italy and Sweden.
For example, UK coal-fired Drax power station needs about 7 m tons of pellets per year. Much of this biomass is expected to come from wood pellet plants in Louisiana and Mississippi, in the southern United States. The power station plans to increase imports of wood pellets as it expects to convert three of its generating units to run on biomass by 2016. In general, UK imported from USA and Canada 1.6 and 1.4 m tons of pellets in 2013 respectively.
Thus, the cost of fright for vessels carrying wood pellets and chips depends on demand for this biofuel in the world. In particular, it much depends on the European Union as the largest importer of wood pellets. Though there is some fall in fright prices it is expected to bounce back to normal indicators by the end of the year as demand for industrial wood pellets will increase, especially in UK.
Author: Ivan Prokhorov
