Biomass Exchange review – November 2019
More biomass delivered under long-term contracts for the first time in November
In November, due to the unusually warm weather in our region, the demand for biomass dropped and the turnover of the BALTPOOL biomass exchange consequently decreased by 39%; furthermore, the amount of biomass delivered under long-term contracts was historically high for the first time. On the other hand, the Market Maker Programme launched in November nearly doubled the demand for biomass at the exchange in foreign countries.
In November, the turnover of the BALTPOOL biomass exchange decreased by 39% compared to October – from EUR 3.713 million to EUR 2.26 million. These trends were mostly due to the still prevailing warm weather during this heating season. November 2019 was warmer compared to last year, with the temperature at 4.9°C (in November 2018, the outside temperature was between 1.2 and 3.4°C).
Twenty important information notices were published during the relevant period. Of these, 15 notices related to the decreased demand for biomass. November 2019 was the first month of the heating season over the past several years when biomass was mostly delivered under long-term contracts.
A total of 17,264 TOE of biomass was purchased in November, which is a 39% decrease compared to October (26,046 TOE). Most of the biomass (42%) was purchased under one-week contracts; 44% accounted for one-month contracts and 14% accounted for one-quarter contracts. Compared to October, the weighted price under the concluded one-week transactions decreased by 3.5% from 138.22 EUR/TOE to 133.45 EUR/TOE. The price under one-month contracts also decreased by 10% from 145.19 EUR/TOE to 130.46 EUR/TOE, and the price under long-term contracts decreased by 16% from 149.14 EUR/TOE to 124.72 EUR/TOE. Accordingly, the yearly decrease of prices under one-week transactions was 31% (from 193.95 EUR/TOE), 36% for one-month transactions (from 204.16 EUR/TOE) and 37% for long-term transactions (from 198.92 EUR/TOE).
The month’s highest value of the BWCS LT index (119.51 EUR/TOE) was recorded at the beginning of November. At subsequent auctions, the BWCS LT index decreased to 112.67 EUR/TOE in the middle of the month and further increased to 116.88 EUR/TOE by the end of the month. In the course of one month (from the end of October until the end of November), the index decreased by 4%, and the yearly decrease was 39% (from 190.84 EUR/TOE in the same period last year). The lowest value of the index (112.67 EUR/TOE) was recorded on 19 November 2019.
The demand for biomass deliveries in November decreased by nearly 6% compared to October (43,487 TOE). A total of 40,980 TOE of biomass was delivered: 18% was delivered under one-week transactions, 19% was delivered under one-month transactions and the remaining 63% was delivered under one-quarter and half-year transactions. The price of delivered biomass in November increased by 4% from 141.98 EUR/TOE (October) to 147.15 EUR/TOE (November). In November 2018, the price of biomass deliveries was 33% higher than in the same period this year (219.41 EUR/TOE).
The Market Maker Programme launched
On 11 November 2019, BALTPOOL launched the Market Maker Programme. The participants who are part of this programme undertake to place orders during each trading auction; the liquidity of energy resources in certain regions will be ensured in this manner.
Following launch of the programme, the activity on foreign markets increased; 89 orders were placed in November, compared to the 54 orders placed in October. The value of the placed orders totalled EUR 1.252 million, and the value in October was EUR 648,000. In November, the demand on foreign markets increased by 77%, from 930 TOE (10,816 MWh) to 1,650 TOE (19,190 MWh), compared to the previous month. The supply from foreign participants more than doubled – from 2,454 TOE (28,540 MWh) in October to 5,022 TOE (58,406 MWh) in November.
The increasing liquidity on the BALTPOOL exchange attracts new participants which are looking for opportunities to buy or sell biomass. Two new participants from Poland registered with BALTPOOL at the end of November. This has also encouraged current participant sellers to attempt to enter new markets by offering to conclude the first transactions in Poland’s Podlaskie Voivodeship. When the exact demand for biomass of a potential buyer and the transportation distance are unknown, it is difficult to set a specific price, which means that the supply currently being formed in the Polish region may provide an inaccurate reflection of the actual market situation.