Manufacturers of fuel pellets propose to introduce a separate transport subsidy

Pellet producers intend to ask the government to provide them with a separate transport subsidy. This will expand export opportunities, the only direction of which is now South Korea. As another option for support, companies see the conversion of the Ministry of Defense boiler houses from coal and fuel oil to pellets. Experts believe that these measures can only be effective in combination, but for now they hope that the ban on pellet supplies to China will be lifted.

Timber traders in the North-West propose introducing a separate transport subsidy for pellets. The regional assembly of the Arkhangelsk region intends to send corresponding appeals to Deputy Prime Minister Victoria Abramchenko, heads of the Ministry of Industry and Trade Denis Manturov and the Ministry of Economy Maxim Reshetnikov early next week.

Under the current rules, according to industry participants, pellet producers will not be able to receive subsidies.

As Alexander Dyatlov, head of the Arkhangelsk Legislative Assembly committee, explained to Kommersant, pellet producers now receive subsidies for transportation along with other timber companies, participants in the metallurgical and chemical industries. In general, in 2024, companies should receive about 7 billion rubles for compensation of expenses. with a limit of 500 thousand rubles. to the organization. Subsidies will be distributed in March. “The timber merchants of the Arkhangelsk region, thanks to the transport subsidy, will be able to cover no more than 6% of losses. And, as we understand, the funds will go to lumber, but it won’t come to pellets,” said the deputy.

The pellet production was hit hard by the sanctions, as the target market was Europe. According to Rosstat, the volume of production of fuel pellets in Russia in 2023 fell by 31.4%, to 1.46 million tons. At least 20% of enterprises have completely stopped or switched to fuel briquettes, they say in the Russian Pellet Union.

As the ULK group explained, South Korea became the only export market. The surplus was reflected in prices within the country. Thus, from November 2023 to mid-January 2024, the cost of pellets fell by almost 20%, to $99 per ton, while the price of transportation increased by $10–15 per ton due to the situation in the Red Sea, they say at ULC. The group estimates its transport costs for the export of pellets (production volume is 300 thousand tons per year) at 3.5 billion rubles. The company would like to compensate about 2 billion rubles, which is 50% of revenue for the goods and 60% of transportation costs. The Titan group (about 200 thousand tons) believes that subsidies should amount to at least 500 million rubles. to the company. At the level of 450 million rubles. Region-Les also evaluates its needs for transport subsidies (production up to 100 thousand tons).

Pellet producers also intend to appeal to the Ministry of Defense with a proposal to convert their boiler houses to fuel pellets.

As Alexander Dyatlov explained, in the Arkhangelsk region alone there are 94 such boiler houses using coal and fuel oil. Also in 2024, the construction of 20 pellet boiler houses with a total capacity of 48 MW is planned in the region. But, according to the calculations of market participants, their commissioning will ensure the sale of no more than 5% of the pellet production capacity in the region.

Director of the Russian Pellet Union Vladimir Mammatov confirms that now 90% of pellet exports from Russia go to South Korea. Supplies to Turkey have fallen seriously due to tighter EU controls on biofuels coming from Turkey, he notes. The head of the association names China and Mongolia as alternative markets, which plans to implement a large program to replace coal in the capital Ulaanbaatar. In the heating season of 2024, the country plans to purchase 140 thousand tons of Russian fuel briquettes.

Export to China is not yet possible due to local environmental regulations. The issue of lifting the ban is currently being discussed within the Russian-Chinese working group on the development and use of forest resources. According to Mr. Mammatov, a decision from the Chinese side can be expected in the first half of 2024. At the same time, he believes that it is impossible to achieve an increase in pellet consumption only through transport subsidies and it is necessary to stimulate their use in utilities and industry.

Olga Mordyushenko