Wood pellet prices in Europe reached record levels in the fourth quarter of 2008, with consumption estimated at more than eight million tons during the year, according to Wood Resource Quarterly.

Sweden remains the world’s largest producer and consumer of wood pellets, with production reaching 1.7 million tons last year and domestic demand hitting 2.1 million tons (domestic and industrial). The country imported about 400,000 tons.

The UK, Denmark, Sweden and Germany are predicted to see the fastest increase in pellet consumption over the next few years, but the financial crisis has delayed investments in several new pellet facilities.

The largest cost component in pellet production, wood fibre, is expected to fall this year as competition for wood chips and pulpwood weakens