Euronext launches wood pellet contract

Euronext will launch 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% of the residential pellets global production is sold for use in boilers, heaters and local utilities.
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.

Dr Rakos, president of the European Pellet Council (EPC) and president of Propellet Austria, says: '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. Euronext will be using our ENplus A1 certification as a base for the underlying of its future contract.'

Lee Hodgkinson, head of markets and global sales at Euronext, says: '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.'

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