Industrial Wood Pellets Market - Global Industry Size, Share, Trends, Opportunity, and Forecast Segmented By Application (Heating and Electricity Production), By End User (Power Generation, Food Processing, Waste Management & Recycling, Others), By Region & Competition, 2021-2031F

Forecast Period	2027-2031
Market Size (2025)	USD 7.96 Billion
CAGR (2026-2031)	11.59%
Fastest Growing Segment	Power Generation
Largest Market	Europe
Market Size (2031)	USD 15.37 Billion

Market Overview

The Global Industrial Wood Pellets Market will grow from USD 7.96 Billion in 2025 to USD 15.37 Billion by 2031 at a 11.59% CAGR. Industrial wood pellets are standardized, high-density biofuels manufactured from compressed biomass residues, such as sawdust and forestry byproducts, serving as a critical low-carbon alternative to coal for large-scale power generation. The market is primarily propelled by aggressive global decarbonization mandates and government incentives designed to accelerate the transition toward renewable baseload energy. These regulatory frameworks facilitate the conversion of thermal power stations to biomass, ensuring stable demand. According to Bioenergy Europe, in 2024, global industrial wood pellet consumption reached a record high of 26.6 million tonnes.

However, the sector encounters a substantial impediment concerning increasingly stringent sustainability criteria and supply chain transparency. Regulatory mechanisms, such as the European Union’s Deforestation Regulation, impose rigorous compliance requirements on sourcing and traceability. This regulatory complexity creates potential supply bottlenecks and elevates operational costs for producers, presenting a significant challenge that could restrict feedstock availability and impede the broader expansion of the market.

Key Market Drivers

Government renewable energy mandates and subsidies act as the primary catalyst for the industrial wood pellets market, creating a stable economic environment for producers through mechanisms like Feed-in Tariffs and Contracts for Difference. These regulatory frameworks incentivize the continued operation of large-scale biomass facilities by offsetting the higher cost of wood pellets compared to fossil fuels. For instance, according to Biomass Magazine, February 2025, in the 'Drax reports 5% increase in wood pellet production for 2024' article, Drax Power Station generated 14.6 terawatt-hours of biomass electricity in 2024, driven by its critical role in the UK’s renewable energy infrastructure. This policy-driven demand also stimulates robust global trade flows, as nations without sufficient domestic biomass resources must import significant volumes. According to Biomass Magazine, in 2025, total U.S. wood pellet exports for the first half of the year reached 5.83 million metric tons, highlighting the scale of supported supply chains.

The accelerated transition from coal to biomass power generation further amplifies market growth, as utilities utilize existing infrastructure to meet decarbonization targets through co-firing or conversion. This trend is evident in Asian markets, where coal assets are repurposed to burn wood pellets, extending the operational life of thermal plants while reducing carbon intensity. Japan and South Korea have emerged as aggressive adopters, heavily relying on imports. According to The Investor, July 2025, in the 'Vietnam's wood pellet industry needs production standardization to meet global demand: experts' article, Vietnam exported over 3.9 million tons of wood pellets in the first half of 2025, with Japan accounting for 60% of this volume. This surging import demand underscores the critical link between coal-to-biomass conversion strategies and supply chain expansion.

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Key Market Challenges

The Global Industrial Wood Pellets Market is facing a significant impediment due to increasingly stringent sustainability criteria and supply chain transparency requirements, particularly those enforced by the European Union’s Deforestation Regulation. These rigorous mandates oblige producers to provide precise geolocation data for raw materials to verify deforestation-free sourcing. This creates a complex operational environment for manufacturers relying on sawmill residues, as tracing waste byproducts back to their original forest plots is logically difficult and resource-intensive. The associated rise in compliance costs and administrative burdens threatens to alienate smaller feedstock suppliers, thereby restricting the overall availability of eligible biomass and tightening the market's supply chain.

This regulatory friction directly hampers the industry's ability to expand capacity at a pace necessary to satisfy the growing demand for low-carbon baseload energy. The emphasis on detailed traceability creates supply bottlenecks that stall production growth, preventing manufacturers from scaling up efficiently. According to Bioenergy Europe, in 2024, global wood pellet production was 48.3 million tonnes. This stagnation in production volume underscores the difficulty producers face in scaling operations while navigating these evolving compliance landscapes, ultimately limiting the market's broader expansion potential.

Key Market Trends

The integration of Bioenergy with Carbon Capture and Storage (BECCS) represents a pivotal shift from carbon-neutral to carbon-negative power generation strategies. This trend moves beyond simple combustion by embedding carbon capture technologies directly into biomass facilities, effectively removing biogenic CO2 from the atmosphere permanently. This technological evolution allows producers to monetize negative emissions credits, creating a new revenue stream while insulating the sector from criticism regarding carbon neutrality. A prime example of this industrial advancement is visible in Europe, where large-scale infrastructure is moving from planning to execution. According to Bioenergy Insight, June 2025, in the 'Stockholm Exergi breaks ground on BECCS project in Sweden' article, the utility company commenced construction on a €1.2 billion facility designed to capture and permanently store 800,000 tonnes of biogenic carbon dioxide annually.

Simultaneously, the market is witnessing the accelerated adoption of torrefaction and black pellet technologies to overcome the physical limitations of traditional white pellets. Black pellets are water-resistant and possess a higher energy density, allowing them to be stored outdoors and pulverized using existing coal infrastructure without costly retrofitting. This "drop-in" capability is proving essential for utilities, particularly in Asia, seeking to extend the operational lifespan of thermal assets while meeting stricter decarbonization targets. Highlighting this technological scale-up, according to Argus Media, January 2026, in the 'Japanese firms to advance biocarbon projects' article, Idemitsu Kosan's newly commissioned black pellet factory in Vietnam established a commercial production capacity of 120,000 tonnes per year to supply Japanese power plants.

Segmental Insights

The Power Generation segment represents the fastest-growing category in the Global Industrial Wood Pellets Market, fueled by the widespread transition from coal to renewable biomass energy. Utility companies are increasingly modifying thermal power plants to accommodate wood pellet co-firing, a move often necessitated by decarbonization policies such as the European Union’s Renewable Energy Directive. This operational shift allows energy producers to utilize existing infrastructure while complying with strict emission standards. As nations prioritize net-zero targets, the demand for wood pellets as a reliable fuel source for electricity generation continues to expand rapidly.

Regional Insights

Europe maintains a dominant position in the global industrial wood pellets market due to stringent environmental regulations and robust government support for renewable energy. The region's leadership is largely driven by the European Commission's Renewable Energy Directive, which mandates specific targets for reducing carbon emissions and increasing biomass usage. To comply with these standards, power generation facilities across the region have actively transitioned from coal to biomass, creating substantial demand for wood pellets. This legislative framework ensures a stable and expanding market for industrial biomass within the European energy sector.

Recent Developments

• In December 2024, Enviva emerged from Chapter 11 bankruptcy protection as a private company following a successful financial restructuring that reduced its debt by approximately $1 billion. As part of this strategic turnaround, the company secured new financing to fully fund the completion of its eleventh industrial wood pellet production plant in Epes, Alabama. This facility is expected to add significant capacity to the company's production footprint, supporting its ability to meet long-term supply contracts with international power and heat generators in the Global Industrial Wood Pellets Market.
• In October 2024, Drax Group announced a collaboration with Smart Green Shipping to trial "FastRig" sail technology on vessels transporting wood pellets. This innovative partnership, part of a broader effort to decarbonize the company's supply chain, involved installing wind-assist technology to reduce fuel consumption and greenhouse gas emissions during shipping. The trial represents a significant step in addressing Scope 3 emissions associated with the global transportation of biomass. If successful, the technology could be deployed across the company's shipping fleet, setting a new standard for environmentally responsible logistics in the bioenergy sector.
• In September 2024, Sumitomo Forestry Co., Ltd. entered the wood pellet manufacturing business by commissioning its first production plant in Indonesia through a joint venture, PT. Biomassa Lestari Nusantara. The facility, located in Central Java, began operational trials with the objective of supplying sustainable biomass fuel primarily to power generation plants in Japan. This collaboration integrates the company's expertise in forestry management with the growing demand for stable biomass supply in the Asian industrial market. The project utilizes wood waste and unused logs from local communities, promoting resource efficiency and ensuring consistent quality for industrial customers.
• In February 2024, Graanul Invest announced the launch of a new premium wood pellet brand, "g Graanul," specifically tailored for customers in the Baltic region. This strategic product launch aimed to provide high-quality, sustainable heating solutions to local consumers, reinforcing the company's position as a leading player in the Global Industrial Wood Pellets Market. The initiative reflects the company's commitment to diversifying its product portfolio and enhancing service offerings in Europe. By introducing a dedicated brand, Graanul Invest intended to strengthen customer loyalty and ensure a steady supply of premium-grade pellets for efficient combustion in modern heating systems.

Key Market Players

• Drax Group PLC
• Enviva Inc.
• The Westervelt Company
• Fram Renewable Fuels LLC
• Rentech Inc.
• German Pellets GmbH
• Energex American Inc.
• LIGNETICS Inc

By Application	By End User	By Region
Heating Electricity Production	Power Generation Food Processing Waste Management & Recycling Others	North America Europe Asia Pacific South America Middle East & Africa

Report Scope:

In this report, the Global Industrial Wood Pellets Market has been segmented into the following categories, in addition to the industry trends which have also been detailed below:

• Industrial Wood Pellets Market, By Application:

• Heating
• Electricity Production

• Industrial Wood Pellets Market, By End User:

• Power Generation
• Food Processing
• Waste Management & Recycling
• Others

• Industrial Wood Pellets Market, By Region:

• North America
• United States
• Canada
• Mexico
• Europe
• France
• United Kingdom
• Italy
• Germany
• Spain
• Asia Pacific
• China
• India
• Japan
• Australia
• South Korea
• South America
• Brazil
• Argentina
• Colombia
• Middle East & Africa
• South Africa
• Saudi Arabia
• UAE