Euronext launches wood pellet contract

By Euronext | June 29, 2015

Euronext has announced that it will be launching a new wood pellet commodities futures contract in the autumn of 2015, subject to regulatory approval.  Aimed at producers, wholesalers and retailers, this physically-settled contract targeting the residential heating sector, will allow the industry to hedge its positions. 

Wood pellets, manufactured from stem wood and untreated residues from the wood processing industry, are a fast growing, sustainable source of renewable energy, particularly in Europe where 80 percent of the residential pellets global production is sold for use in boilers, heaters and local utilities.  Environmental energy policies in the European Union are increasingly favoring renewable energy, which in turn is incentivizing people to switch to alternative sources of energy. It is expected that wood pellets will play a central role in this transformation, thanks to their low cost in comparison to other fuels.  Fluctuations in prices in the wood energy industry are caused by northern hemisphere winter weather seasonality patterns, economic supply and demand evolutions or raw material availabilities.

Christian Rakos, president of the European Pellet Council and president of Propellet Austria, said, “This is an important initiative for the pellet industry as it provides a clear response to the high volatility we have seen recently in pellet pricing. It will offer a hedging tool that will allow our members to manage their risk from production to purchase to sales.  The European Pellet Council is delighted that Euronext will be using our ENplus A1 certification as a base for the underlying of its future contract. We believe this initiative will contribute to reinforce and structure the sector.”

Lee Hodgkinson, head of markets and global sales at Euronext, said, “One of the key reasons for the launch of this product is the exponential growth we have seen in recent years in wood pellets as an alternative source of renewable energy. In the light of the United Nations Climate Change Conference to be held in Paris in the autumn this year, Euronext is delighted to be offering the real economy a product that supports renewable energy initiatives.  We are confident in the future success of this product as, in addition to new interest from within the industry, many of our existing clients are looking for a way to hedge their prices in this sector.”