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Pellets Sold Out Before Winter, Producers Already Concerned About Raw Materials

Nakon investicija u Delnicama i Udbini kapacitet RST-Pelleta popeo se na 135 tisuća tona godišnje, no tvrtka poručuje da veći problem od proizvodnje postaje osiguranje sirovine — i to baš uoči zime u kojoj se potražnja teško predviđa
Nakon investicija u Delnicama i Udbini kapacitet RST-Pelleta popeo se na 135 tisuća tona godišnje, no tvrtka poručuje da veći problem od proizvodnje postaje osiguranje sirovine — i to baš uoči zime u kojoj se potražnja teško predviđa / Image by: foto

Finally, it has cooled down after perhaps the longest heatwave in our area. The drop in temperature and rain reminded us that winter exists and that those who have not thought about it should start looking for raw materials for heating, especially those who heat with pellets, as last winter’s experience shows what it means to secure them in time.

There are also experiences from previous years, such as the winter of 2022/2023, when a large quantity of this fuel went for export. Prices rose because of this, but also due to the war between Ukraine and Russia, i.e., the energy crisis. At that time, the largest pellet producer in Croatia, RST-Pellet, in cooperation with the local government in Delnice, distributed vouchers (each worth 130 euros, or a thousand kuna at that time) to financially and fuel-impaired citizens. A maximum of four vouchers were distributed per household, which was a saving of 520 euros, or 4000 kuna. A total of a thousand vouchers were distributed, meaning RST-Pellet donated a million kuna (130 thousand euros) to the people of Delnice.

How Pellets Are Made

It was a commendable move by the company, which has modernized production since it started operating in 2019. Financial director Goran Petranović says that in Croatia, about 115 thousand tons of pellets are produced annually at two production locations. Until now, the annual capacity of the plant in Delnice was approximately 70 thousand tons (increased to 80 thousand tons this year), while production in Udbina amounts to about 45 thousand tons (increased to 55 thousand tons this year), meaning that in the next period, the capacity will be approximately 135 thousand tons.

– At the level of the entire RZ Group, of which RST-Pellet is a member along with plants in Austria, Italy, and Slovenia, the total annual production is between 700 and 800 thousand tons of pellets – says Petranović.

From this data, it is evident that Croatia is an important part of the overall production platform of this group. Pellets are produced from approximately 85 percent industrial (spatial) wood and 15 percent by-products from sawmills (sawdust, chips, remainders).

The production process begins with stripping the bark from industrial wood, explains assistant director and procurator Philip Stückler. The wood is then shredded with a hammer mill, and the shredded material is transported via conveyor belts to the second grinding stage, a wet hammer mill.

– After further shredding, the prepared material is dried, and then it goes through another, special fine grinding process in a dry hammer mill. It then passes through a filtration system during which fine dust is removed. This helps us ensure consistent quality of raw materials in the further production process. The material is then fed into presses where it is compressed into pellets under high pressure. The freshly pressed pellets are then cooled in a cooling system to achieve the required temperature – Stückler describes the process.

After an appropriate cooling period, the finished pellets are packaged according to customer requirements, in smaller or larger bags, and prepared for further transport.

New Photovoltaic Systems

Both locations have invested in expanding technical infrastructure and sustainable production. In Udbina, the photovoltaic system was expanded by an additional 0.49 megawatts of peak power (the standard designation for the maximum power of a photovoltaic power plant under idealized, standardized conditions), while a new photovoltaic system with a capacity of 1.4 megawatts of peak power was installed in Delnice. This allows the company to cover most of its energy needs with its own renewable energy.

– In addition, in Udbina, we optimized the drying process by expanding the dryer and installing another, larger pellet press. This has significantly increased our production capacity, allowing us to produce about 55 thousand tons of pellets per year, even up to 60 thousand. Another important step was the introduction of a new raw material processing system. This allows us even more efficient quality control of raw materials and ensures consistently high quality of pellets – explains Stückler.

Investments and Challenges

In Delnice, an additional pellet press has also been invested in, which, as noted, will increase the annual production capacity of the location to approximately 80 thousand tons. With these investments, the company not only strengthens production capacities but also improves energy efficiency, process reliability, and overall product quality. The commissioning and optimization of new equipment are in the final stages. Once full operational capacity is reached, RST-Pellet believes that further opportunities for improvement in both production and processes will arise. However, they say it is still too early to say whether this will immediately result in another increase in production volume.

– A key factor for this is the development of the raw materials market. Competitive pressure, especially from Italy and Slovenia, is now very strong. As a result, domestic pellet producers, and the Croatian wood industry in general, are finding it increasingly difficult to procure the necessary raw materials under competitive conditions. Therefore, we do not focus solely on further increasing production capacities. It is equally important to ensure a secure, long-term supply of raw materials and to increase the efficiency of existing processes. We are closely monitoring market movements and will make future investment decisions accordingly – says Stückler, while Petranović adds that the company’s advantage lies not only in the total production capacity but also in the geographical distribution of production, proximity to the raw material base, and the ability to supply various European markets.

This allows for more flexible management of production and logistics and is a good basis for further development and strengthening of competitiveness.

Raw Material Procurement

Raw material procurement for production is different in the two plants. The Delnice plant, based on contractual relations with Croatian Forests (HŠ), secures about 25 percent of the required quantities, while the remaining raw materials are procured on the open market, at market prices, with as much as 65 percent of these quantities coming from imports, primarily from Slovenia, Italy, and Austria.

– Ensuring a more stable and local raw material base was one of the important reasons why we acquired a company in the Udbina area last year. There, the procurement structure is much more favorable. About 70 percent of the required wood raw material is secured within contractual relations with HŠ, while the remaining 30 percent is procured from private suppliers and at auctions. Local raw material is important to us not only for supply security and continuity of production but also concretely affects business results due to lower procurement and logistics costs and reduces our dependence on imports and international price movements. Therefore, it is important for us in the long term to further develop the local raw material base and stable relationships with domestic suppliers – emphasizes Petranović.

Shortage on the Horizon

We ask them if there will be demand for pellets this winter, to which Petranović responds that the situation is very similar to last year. Even during this pre-season, they sold available quantities, and now almost all production is shipped directly to customers, without creating larger stocks.

In addition to winter conditions, demand for pellets should be viewed in the context of current global energy and geopolitical movements. The uncertainty related to the prices and availability of primarily gas and oil, as well as wars and disruptions in global energy markets, further stimulates interest in renewable energy sources.

– Therefore, we believe that demand for pellets will remain high – Petranović is convinced.

At RST-Pellet, they continuously emphasize to consumers the importance of timely pellet purchases, especially for those customers who can store them. Pre-season purchases, for example in May and June, have two key advantages: a more favorable price compared to those that usually apply during the main heating season and supply security. By purchasing in time, customers avoid the risk of not being able to secure the necessary quantities during the peak demand period in the winter months.

– Year after year, we notice that customers are procuring pellets earlier, which is a positive trend, but we believe there is still room for further consumer awareness. We pay special attention to long-term customers and partners, as well as to the local population that has been buying pellets from us for years. We strive to ensure continuity of cooperation and take care of the quantities they need – says Petranović.

Important Regional Connections

We ask Stückler if they are lacking workers. He responds that they currently do not have major difficulties in finding suitable employees, and turnover is relatively low. They have strategically opted to ensure attractive and fair working conditions (good pay, automated and safe jobs in accordance with the highest occupational safety standards) because satisfied and valued workers are an important foundation for the company’s long-term success.

– Regional connections are also particularly important to us. Most of our employees come from the immediate vicinity of our locations. This way, we create jobs in the regions where we operate, while also benefiting from employees who have a strong connection to their communities. A strong regional connection is an important part of our company’s culture, and we intend to maintain it in the future – says Stückler.

The future of pellet producers in Croatia, our interlocutors believe, is promising, albeit in the short term, as the European pellet market will again be influenced by events in Austria and Germany this year. Namely, both markets are facing challenges in the availability of raw materials. Therefore, the importance of Croatia as a producer and exporter of pellets is likely to increase further.

Development of the Raw Materials Market

However, they warn that it will be challenging for producers to accurately predict household demand from year to year. There are years when it is significantly higher and those when much less pellets are needed. This complicates, say our hosts, precise planning of production volume.

– This challenge became particularly evident last year. Demand significantly increased then, while production conditions were simultaneously more difficult due to low external temperatures. Therefore, we could not always produce the quantities that the market demanded at that moment. Looking ahead, it will be crucial to find the right balance between production capacities, secure raw material supply, and actual market demand. We are confident that Croatian pellet producers have good conditions for further development in this sector, but key factors will be the development of the raw materials market in Croatia and Europe and the long-term change in demand in individual markets – concludes Stückler.

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