Baltpool biomass exchange results in 2024: market dominated by logging residue wood chips and short-term contracts

2024 was a year of significant change in the Baltic biomass market, with the importance of transparency in trading continuing to grow, market participants stepping up their search for more efficient solutions, and EU requirements giving further impetus to the implementation of sustainability standards. The volume of transactions on Baltpool’s biomass exchange increased by 3.7% year-on-year to 8.5 TWh, but the 18.3% decrease in the average biomass price (from 24.93 EUR/MWh in 2023 to 20.36 EUR/MWh in 2024) led to a decrease in the total value of transactions to €174 million.

One of the most important trends for 2024 is the growing demand for lower quality biomass, driven not only by technological change but also by EU directives on more efficient use of forest resources. For the first time in Baltpool’s history, sales of SM3 and SM4 wood chip products, i.e. wood chips produced from logging residues (such as branches), exceeded sales of SM1 and SM2 products. During the year, the volume of trade in these products grew by 31.3% to 4.3 TWh and accounted for 51% of the total trade in wood chips on the exchange.

“The market demand for lower quality biomass has increased, especially due to the Vilnius CHP plant, whose technology allows efficient combustion of higher ash biomass such as SM3 and SM4. This has become a signal for producers to increase the production of this type of biomass as it meets new market demands. EU directives are also encouraging the wider use of logging residues, which reduces the waste of raw material and increases the efficiency of local production,” says Vaidotas Jonutis, head of trading at Baltpool biomass exchange.

“In the past, some of the logging residues used to stay in the forests – for example, branches would just rot in the forest and still emit CO₂ – but today they are used as fuel, burned in cogeneration plants. This not only allows for an efficient use of the raw material resources and less waste, but also reduces dependence on imported fuels,” explains V. Jonutis.

Domestic production has compensated for the decrease in imports

In 2022, the suspension of imports from Belarus allowed biomass market participants to adapt quickly, with domestic production covering demand and ensuring market stability.

“Despite the sudden cessation of imports, we have not only managed to compensate for the shortage of raw material, but also to avoid significant price spikes. In Lithuania Vilnius CHP has become the main consumer of lower quality fuel, while the Lithuanian State Forest Enterprise has increased the supply of local biomass feedstock at a record pace,” says Baltpool’s Head of trading.

Market participants opt for more flexible trading strategies

In 2024, biomass buyers have adopted new strategies to secure their demands with short-term contracts. As much as 75% of all wood chip trading was done through SPOT (i.e. weekly) and monthly contracts – almost 1 TWh more than in the previous year.

“This shows that participants are increasingly looking for flexibility to adapt quickly to market fluctuations. The price difference between short-term and long-term contracts was small – less than €3 per MWh in 2024 – so participants were more active in choosing short-term deals,” adds V. Jonutis.

According to the expert, such a strategy may pose challenges for suppliers planning longer-term investments. If this trend continues, new solutions may have to be found to ensure long-term stability of supply and to encourage greater diversification of contracts.

Increasing number of participants in the RED BP scheme

The goal of sustainability in 2024 was also clearly visible in the RED BP biomass sustainability scheme. The scheme has become the most popular biomass sustainability verification scheme in the Baltics, with a 24% increase in the number of participants per year. In 2024, 122 biomass suppliers from Lithuania, Latvia and Estonia, and 67 biomass buyers from Lithuania and Latvia participated in the scheme, and 6.4 TWh of biomass was delivered with a RED BP tag, representing 81% of the total amount of biomass purchased and delivered through the Exchange in Latvia and Lithuania in 2024.

“The EU’s strategic objectives to reduce greenhouse gas (GHG) emissions are driving market players towards certified biomass, which not only ensure regulatory compliance but also clearer trading mechanisms. This is a sign that sustainability is no longer just a choice for companies – it is becoming a necessary market standard,” says V. Jonutis.

He said that market participants not only value transparency, but also actively implement EU requirements, adapting to the new rules in a timely and efficient manner.

“The achievements in 2024 confirm the successful transformation of the market, from offsetting the sharp drop in imports with domestic production to the more efficient use of logging residues for wood chip production. We see that in 2025, sustainability and innovation will create even greater market efficiency and stable growth,” concludes V. Jonutis, Head of Trading at Baltpool biomass exchange.