Wood pellets are expensive primarily because the raw materials used to make them are increasingly scarce, and the manufacturing process itself is energy-intensive. As of October 2025, the average price in the U.S. sits around $246 per ton, and several converging forces explain why that number has stayed stubbornly high.
Sawdust and Sawmill Residues Are Running Out
The single biggest factor is feedstock. About 92 percent of wood pellets in the European Union are made from sawmill residues: sawdust, wood chips, shavings, and other byproducts of the lumber industry. Pellet manufacturers don’t typically harvest whole trees; they depend on waste material from sawmills and timber operations. When those industries slow down, the supply of raw material shrinks with them.
That’s exactly what’s been happening. Across Europe, pellet production has stagnated because there simply isn’t enough raw material to go around. In Bulgaria, wood prices have jumped 30 percent over the past two years. In Estonia, production is actively declining due to reduced raw material availability, compounded by government restrictions on cutting trees in protected forest habitats. Portugal faces the same constraint. Poland’s pellet industry is worried about government policies protecting forests from harvesting.
In North America, the story plays out slightly differently but with the same result. When sawmills close, nearby pellet plants lose their supply chain. Drax, one of the largest pellet producers, announced it would cease operations at its Williams Lake plant in British Columbia by the end of 2025 after neighboring sawmills curtailed or shut down, eliminating the fiber supply that made the plant commercially viable. Fewer operating plants means less competition and tighter supply for consumers.
The Russia Supply Shock
Before 2022, Russia was a major wood pellet exporter, particularly to Europe. After the invasion of Ukraine, the EU imposed import bans on Russian wood pellets. EU imports from Russia dropped 45.7 percent in 2022, then fell to nearly zero in 2023. That removed a significant volume of pellets from global trade practically overnight.
This didn’t just raise prices in Europe. Global pellet markets are interconnected. When European buyers lost Russian supply, they turned to producers in North America, the Baltics, and elsewhere, increasing competition for those pellets and pushing prices up across the board. Even though spot market prices have come down somewhat from their 2022 peak, the structural loss of Russian supply continues to keep the market tighter than it was before the war.
Making Pellets Takes a Lot of Energy
Wood pellets look simple, but producing them is surprisingly energy-intensive. Raw wood has to be dried (often from a moisture content of 50 percent or more down to about 10 percent), ground into uniform particles, forced through a die under high pressure, and then cooled and packaged. According to the University of Tennessee Institute of Agriculture, it takes about 1.1 million BTUs of electrical energy to produce a single ton of delivered pellets. That’s roughly equivalent to running a space heater nonstop for two weeks.
Drying is the most energy-hungry step. Wet sawdust needs a tremendous amount of heat to drive off moisture before it can be compressed. When natural gas or electricity prices rise, those costs flow directly into the price of every bag of pellets. Transportation adds another layer: pellets are heavy and bulky relative to their value, so shipping them from the plant to a retail store or your doorstep eats into margins and raises the final price.
Growing Demand From Multiple Directions
Wood pellets aren’t just a home heating product anymore. Large-scale power plants in Europe, the United Kingdom, and parts of Asia burn industrial wood pellets to generate electricity, counting them as a renewable energy source under climate policies. This industrial demand competes directly with residential pellet supply for the same limited pool of sawmill residues.
That competition for raw material is intensifying. The USDA reports that increasing competition for sawdust resources across the EU is pushing manufacturers to explore alternative biomass sources, like agricultural residues, but those alternatives come with their own costs and logistical challenges. For now, sawdust remains the preferred feedstock, and everyone from homeowners to power utilities is chasing the same supply.
How to Spend Less on Pellets
Pellet prices follow a predictable seasonal pattern. Demand peaks during winter heating months, and retailers price accordingly. Buying in the spring or early summer, when demand drops and retailers want to move inventory, typically gets you the best price per ton. Many dealers offer preseason discounts or bulk pricing if you order a full pallet (usually one ton, or about 50 forty-pound bags) before fall.
Buying in bulk almost always beats buying individual bags from a hardware store, where you might pay $7 to $9 per bag compared to $5 or $6 per bag on a full pallet. Storing pellets is straightforward as long as you keep them dry. A garage, shed, or covered area works fine. If you go through three or four tons per winter, locking in a preseason price can save you $100 to $200 over the heating season.
Pellet quality also matters for your wallet. Premium pellets with less than 1 percent ash content burn more efficiently and produce less clinker buildup, meaning your stove runs better and you use fewer bags over the season. Cheaper, high-ash pellets can seem like a bargain but often cost more in the long run through wasted fuel and extra maintenance.