2016 04 15

Heat producers start preparations for summer and even next winter

March was the last month when it was possible to conclude half-year contracts for the non-heating season. This opportunity was availed of by heat producers that prefer to ensure supply for 6 months rather than expect to benefit from short-term price fluctuations. Some suppliers have already concluded contracts for the supply of biomass for the next heating season. A total of 14 half-year contracts were concluded in March, of which 3 contracts are for the 2016 heating season. The number of long-term contracts in March increased by 155% and totalled 51.

Record number of concluded contracts

A record number of concluded contracts – 499 – was recorded in March. The increased activity resulted from the high number of short-term contracts – 448 (an 84% increase compared to February). Buyers of biomass now tend to vest more trust in the liquidity of the biomass exchange and increasingly prefer ensuring biomass supply under short-term contracts.

Biomass prices remain stable

In March, the weighted average supply price of woodchips was 148 EUR/TOE, which is a 0.7% decrease compared to February. This minor decrease in the prices was affected by the considerably increased number of short-term contracts and their weight in the total quantity of supplied biomass.

A major price drop expected in May

Detailed analysis of long-term and short-term contracts shows that their prices decreased at similar paces. Slightly greater changes were recorded for short-term contracts: in March, the average weighted price of woodchips was 151 EUR/TOE and was 4% lower compared to February. The supply price under long-term contracts decreased by 3.19%, but this change is not very significant because the weighted biomass price in February increased by 2.4% compared to January.

Supply of biomass in the market remains vast

The record number of concluded contracts and the contract turnover increasing to EUR 6.5 million have resulted in the increase in the value of orders placed: the value of orders to buy increased by 41% (to reach EUR 14 million) and the value of orders to sell increased by as much as 92% (to reach EUR 49 million).

In winter of 2014–2015 the price of biomass was up to 20% higher

The biomass supplied during the 2015–2016 winter season in nearly all counties was cheaper compared to the same period one year ago. A growth in the supplied biomass price was only recorded in Marijampolė County (-17.46%). The increase resulted from the use of the short-term contract strategy.