The Latvian Competition Authority (KP) has completed its monitoring of the wood pellet market, revealing that the recent substantial increase in pellet prices is attributed to a combination of factors. These include rising production costs, limited availability of raw materials and finished products, increased demand due to cold winters, a rise in export volumes, and the cessation of significant pellet imports from Belarus.

Since July 2026, KP has been investigating the pellet market in response to concerns about price increases and availability ahead of the 2026/2027 heating season. The investigation involved surveys of six pellet retailers and 16 wholesalers and manufacturers, analyzing pricing mechanisms, cost dynamics, competitive conditions, and retail price changes.

KP's monitoring data indicates that the market is not homogeneous in terms of pricing and product availability. There are significant variations in pricing levels, timing, frequency, and direction of price changes among market participants, which suggests no evidence of coordinated actions among the monitored retailers and wholesalers.

Over the past year, the base price of pellets has increased by approximately 73%. From October 2025 to the end of August 2026, the average retail price for a 15 kg package rose from about €4.28 to €7.42, while the average minimum price, including discounts, increased from €4.16 to €5.83, a rise of 40%.

KP found that the most significant impact on the final price of pellets comes from procurement costs, which account for about 70% of the retail price. At the production level, approximately 60% of costs are attributed to raw materials, with the remainder consisting of energy, labor, packaging, transport, equipment maintenance, and other expenses.

The study also highlighted that the Latvian pellet market is closely linked to export markets. In the first half of 2026, the export volume of pellets produced in Latvia was about 27% higher than in the same period in 2025. Producers indicated that export demand directly or indirectly affects domestic pellet prices, leading to upward pressure when foreign markets are more financially advantageous.

Additionally, the reduction in pellet imports, due to EU sanctions on imports from Russia and Belarus since 2022, has further strained local market supply. Belarus was previously a major source of pellet imports, with around 345,000 tons imported in 2021. The loss of this import source has limited options to compensate for local supply shortages during high demand periods.

KP concluded that timely pellet purchases could mitigate risks associated with seasonal demand fluctuations. The cold winter of 2025/2026 and insufficient stockpiling led to a sharp increase in demand that the available pellet supply could not fully meet. Therefore, KP recommends that the Ministry of Climate and Energy collaborate with industry organizations to ensure ongoing assessment and understanding of the pellet market situation.