Buying biomass for the 2026/2027 season — when to negotiate supply contracts

The 2026/2027 heating season will start in October, but the real decisions are made now — between April and July. Anyone going to market for offers in August is already negotiating from a weaker position. Anyone waiting until October is buying spot at prices no one budgeted for. This post is about how the purchasing cycle is structured on the biomass supplier side, why the May–July window is strategically critical and what specifically should be in an annual contract for deliveries from August 2026 to July 2027.

We write from the perspective of an importer-trader who each year signs framework contracts for tens of thousands of tonnes of biomass supplied to district heating plants, CHP plants and industrial facilities. BGT is now accepting orders for the 2026/2027 season — deliveries from August 2026, and the volumes available allow us to offer quantity discounts and schedules tailored to the rhythm of heating plants.

Below: a step-by-step negotiation calendar, pricing formulas (fixed, indexed, hybrid), how to vet a supplier, B2B payment terms, risks, contractual clauses and a decision checklist at the end.

The heating season in Poland — demand calendar

The demand curve for biomass in Polish district heating is highly regular:

• October–November: season start-up, peak burning of lower-energy fuel, stockpiles empty quickly.
• December–February: peak of the season, heating plants run at 80–100% of nominal capacity, continuity of supply is the priority.
• March–April: end of the season, settlement of annual contracts, maintenance planning.
• May–September: summer period, combustion limited to domestic hot water and possibly industrial cogeneration. This is at the same time the negotiation window for the next season.

A biomass trader's financial year does not align with the calendar year. Our season runs from 1 August to 31 July — exactly like the customer's heating season, only shifted by two months to give time to build up stock in ports and on rail sidings before deliveries begin.

The supplier contracting cycle — when contracts actually get signed

The end customer sees the biomass market as something that is "available". But on the supply side the mechanics are rigid:

1. January–March: suppliers close out the financial year, take stock of the season and plan volumes for the next one.
2. April–May: negotiations begin with crushing plants and overseas producers (PKS Indonesia, Black Sea sunflower, olive stone in Spain and Greece). FOB prices are set in this window.
3. May–July: the trader consolidates the supply portfolio and opens ordering with end customers. This is the window in which we have the most pricing and logistical flexibility.
4. August–September: the first seasonal stock-building deliveries begin. Volumes "free" for annual contracts are getting smaller.
5. October–December: the market moves into spot mode — anyone without a framework contract negotiates the price week by week.

Operational takeaway: a procurement team going to market in May with an enquiry for 5,000 t per year gets different terms from one sending an RFQ in October. It is not just about price — it is about volume availability and schedule priority.

Why earlier is better — the mechanics of the advantage

Specifically: what the buyer gains by contracting in the May–July window vs. buying spot in October–December.

• Base price lower by 8–15% — the trader buys the raw material FOB at the peak of crushing plant output (March–May), sea freight is cheaper before the European heating season, EUR/USD is usually less volatile.
• Priority in the delivery schedule — a contracted customer takes the first rail slot in August, a spot customer catches whatever slots are left.
• Ability to budget — a fixed price or an indexed formula lets the CFO plan fuel costs, while spot is a line item labelled "estimate".
• B2B payment terms — an annual contract opens the way to 30–60 day trade credit; spot is often prepayment.
• KZR and ISCC documentation — for regulated power generation, the full certification chain has to be in place before the first delivery; a contract gives you the time to do this, spot does not.

In numbers: on a 5,000 t/year contract, an 8–15% difference in the base price is EUR 40,000–75,000 over the season. That is already a level at which a commercial conversation in May is economically justified.

Types of contract: framework, indexed, spot

The biomass market for regulated power generation runs on three main contract types — each for a different customer risk profile.

Annual fixed-price, fixed-volume contract

• Price fixed for the whole season in EUR/t or PLN/t DAP siding.
• Volume defined with a ±10% tolerance.
• Monthly or weekly delivery schedule.
• Who it suits: heating plants with tariff-regulated revenue, for which predictability of fuel cost matters more than potential savings.

Indexed contract (price formula)

• Base price + indexation formula: TGE Biomass Index, ICE-EEX API#2 (for co-firing with coal), Bursa Malaysia Palm Oil (for PKS), EUR/USD rate.
• Volume defined, price correction quarterly or monthly.
• Who it suits: CHP plants exposed to the wholesale power market that already carry exposure to energy indices — the formula "naturally" hedges them.

Call-off contract with a buffer stockpile

• Annual volume reserved, price fixed or indexed.
• The customer calls off deliveries on a weekly cycle from a port or rail warehouse.
• Who it suits: heating plants with strong seasonality (Q4 + Q1 account for 70% of consumption) that do not want to keep a seasonal stockpile on site.

Spot contract

• One-off transaction for a specific batch, price at the market rate on the day of trade.
• Who it suits: a top-up to a framework contract (e.g. a harsher winter than forecast), testing a new type of biomass, a sudden failure of a parallel boiler.

In practice most of our customers operate on a mix of 70–80% annual contract + 20–30% spot for top-ups — that gives baseline predictability and peak-load flexibility.

Pricing formulas — what you are really negotiating

Pricing formulas in biomass contracts for regulated power generation come down to three constructs:

• Fixed price (EUR/t or PLN/t DAP) — the simplest, works best if the customer is confident about volume and does not want to track indices. The trader hedges FX and freight risk on their own side.
• Indexed price: P = Base + a × (Index_t - Index_0), where Index is e.g. TGE Biomass, API#2 or Palm Kernel Cake CIF Rotterdam. The coefficient a (typically 0.4–0.8) determines how strongly the price follows the index. Quarterly reset.
• Floating price with caps (a collar) — the market price on the delivery day, but with a cap (upper limit) and a floor (lower limit). Protects both sides against extremes. Less commonly used, but useful for long 2–3-year contracts.

Worth adding to the formula: a pass-through of rail freight cost (indexed to PKP Cargo), an FX clause (for EUR-denominated contracts settled in PLN), and a mechanism for recalculation when quality parameters change (bonus/malus for MJ/kg, ash, moisture).

Volumes and quantity discount

The price of biomass is a function of volume — not linearly, but in steps. The thresholds we work with:

Annual volume	Contract type	Discount vs spot price
up to 500 t	single deliveries, flexible	0–3%
500–2,000 t	quarterly or half-year contract	3–7%
2,000–5,000 t	annual contract with a schedule	7–12%
5,000–15,000 t	framework contract with indexation	12–18%
above 15,000 t	strategic 2–3 year contract	15–22%

For the 2026/2027 season BGT has contract volume available in each of these bands — from individual heating plants to large power groups. The quantity discount is one element of the offer, alongside payment terms and the logistics schedule.

Delivery schedule: just-in-time vs seasonal stockpile

Two extreme strategies for taking delivery of biomass, each with its own hidden costs.

Just-in-time (weekly deliveries)

• Advantage: minimal on-site stockpile, working capital tied up for a short time.
• Disadvantage: full exposure to logistics risk — a wagon failure, a siding blockage or a port delay means the boiler has to stop.
• Requirement: a supplier with a buffer stockpile at the port and alternative transport routes.

Seasonal stockpile (August–September build-up)

• Advantage: security of supply at peak, flexibility to react to weather.
• Disadvantage: on-site storage costs (storage yard, moisture losses, self-ignition risk with fresh woodchips), PLN 3–5 million of capital locked up for a 5,000 t stockpile.
• Requirement: storage space, temperature and moisture monitoring system.

The optimal model for most heating plants is a hybrid: 2–4 weeks of on-site stock (operational security) + weekly deliveries from the trader's buffer stockpile + spot for peaks. This model minimises total cost (storage + financing + logistics).

Supplier vetting — what to actually look at

The biomass market in Poland has a low barrier to entry for intermediaries — and a high one for genuine importers. Specifically, what should be on the checklist for every new supplier:

• Companies register (KRS) and financial statements — the last 3 years, revenues, net result, debt. A trader with PLN 5 million in turnover will not handle a contract for 20,000 t per year.
• KZR INiG or ISCC EU certificate — with the number, scope and validity date. Verifiable in the public register.
• References from power sector customers — specific heating plants from the previous season that you can phone.
• Logistics experience — own framework contracts with shipowners, an agreement with PKP Cargo or a private rail carrier, access to port sidings.
• Third-party liability insurance of at least PLN 5 million per event.
• Delivery track record — how many tonnes have actually been imported in the last 2–3 seasons.

A visit to the trader's offices and the transshipment port before signing the contract is a standard step that should not be skipped.

B2B payment terms

The standard range of payment terms in biomass contracts:

• Prepayment (30–100%) — for new relationships, spot contracts, overseas suppliers without receivables insurance.
• Trade credit 14/30/60 days — for contracted customers with a history of cooperation, backed by receivables insurance (KUKE, Coface, Atradius).
• Documentary letter of credit (L/C) — for large international contracts where the parties have no long-term trust.
• Reverse factoring — an increasingly common tool for power groups; it allows the trader to finance the delivery for up to 90 days without touching the customer's credit line.

BGT works as standard on 30-day trade credit from delivery for contracted customers, backed by receivables insurance. For the first delivery — 50% prepayment, 50% 14 days after receipt.

Contractual clauses — what has to be in the agreement

A shortlist of the clauses that must not be left as defaults in a biomass contract:

• Incoterms 2020: CIF (cost + freight + insurance to the port), DAP (to a specific delivery point, e.g. a rail siding), DDP (with full customs and tax handling). For domestic deliveries typically DAP.
• Contractual penalties for improper performance: delivery delay (0.1% of the batch value per day of delay, max 10%), non-conformity of quality parameters (bonus/malus per the table), failure to deliver the annual volume (25–50% of the shortfall value).
• Force majeure with a specific catalogue of events (embargo, port blockade, natural disaster) and a notification mechanism (72 hours).
• Quality clause — sampling at loading and unloading, a reference laboratory, parameter tolerances, an arbitration mechanism.
• Dispute resolution — arbitration court (KIG or ICC), mediation before litigation, governing law (Polish law for contracts with a Polish buyer).
• Change-of-law clause — pass-through of regulatory changes (e.g. changes to KZR requirements, excise duty, import duties).
• Confidentiality and non-compete — as standard, 2 years after contract termination.

The BGT contract template has these elements in a single 8–12 page document — with no separate "general terms and conditions of sale" bolted on.

Supplier-side risks and how to hedge them

Supply-side risk in biomass contracts is real and regularly materialises:

• Commercial unreliability (a middleman with no raw material) — mitigation: KZR verification, references, a returnable deposit, a letter of credit.
• Bankruptcy — mitigation: financial statements, monitoring of liquidity ratios, receivables insurance on the customer side.
• Logistics delays — mitigation: contractual penalties, a supplier with a buffer stockpile in Poland, a second alternative supplier (10–20% of volume).
• Quality risk — mitigation: certified sampling, a bonus/malus table, the right to reject a batch and refuse acceptance.
• Regulatory risk (changes to KZR, tariffs) — mitigation: a pass-through clause, regulatory monitoring at the trader level.

The model we recommend for customers contracting above 5,000 t per year: one strategic supplier (70–80% of volume) + one back-up supplier (20–30%). The strategic trader takes on continuity, the back-up provides insurance in case of an event at the main supplier.

Market situation for the 2026/2027 season

A few facts from recent weeks worth having on the radar:

• PKS supply from Indonesia is stable, FOB prices in April–May 2026 are at 90–110 EUR/t, with expected stabilisation through to the end of Q3.
• Black Sea sunflower — the 2026 harvest is forecast at the five-year average, but logistics risk through Ukrainian ports remains; the trader's portfolio should include a Turkish and Bulgarian alternative.
• Olive stone — the 2025/2026 season in Spain is 15–20% weaker than the 2024/2025 record, prices are 10–15% higher year on year.
• A1 woodchip in Poland — after two seasons of tight supply the situation is easing, but prices are still 15–20% above the long-run average.
• Rail freight — the PKP Cargo tariff is 6% higher from January 2026, private carrier contracts are at a comparable level.
• EUR/PLN — the market consensus for Q4 2026 is 4.25–4.40; it is worth hedging contracts on FX.

The takeaway for orders for the 2026/2027 season: the portfolio should be diversified by raw material and by origin, and the pricing formula should include an indexation component. A pure fixed-price for 12 months is risky for both sides.

FAQ

What is the latest sensible time to sign a contract for the 2026/2027 season? The hard deadline is the end of August 2026 — after that most of the trader's volume is already allocated. The optimal window is May–July.

What are the minimum volumes for a contract conversation? An annual contract with BGT starts at 500 t. Below that we have sensible quarterly offers. Above 5,000 t per year we negotiate a dedicated pricing and logistics formula.

Can I sign an indexed contract without exposure to the TGE index? Yes — we also use formulas based on ICE-EEX (for co-firing), Bursa Malaysia (for PKS) or a simple correction against CPI + FX. The formula is always tailored to the customer's profile.

What happens if the customer does not offtake the contracted volume? As standard there is a ±10% volume tolerance without consequences. Below the lower limit a charge is applied for storage and lost margin (typically 30–50% of the value of the untaken volume).

Is it possible to settle in PLN if the contract is in EUR? Yes — with an FX clause setting the conversion method (NBP average rate on the delivery date, the T-1 rate on the invoicing day) and possibly with FX hedging on the trader or customer side.

What does the process from first enquiry to contract signature look like? Enquiry → preliminary offer (48h) → technical qualification of the fuel (sample, test) → commercial negotiation (2–3 rounds) → draft contract → legal amendments → signature. Realistic timing: 4–8 weeks.

Decision checklist for the procurement team

Before you send an RFQ for the 2026/2027 season, go through these points:

1. Demand forecast for the season (t/month, tolerance) — do you have it ready?
2. Biomass types in the mix (PKS, sunflower, pellet, woodchip) and permitted technology shares — confirmed by the technical department?
3. Contract type (fixed / indexed / hybrid) — aligned with your risk profile and tariff model?
4. Required KZR/ISCC documentation — defined in the RFQ?
5. Delivery basis (CIF port, DAP siding, DDP warehouse) — chosen?
6. Payment terms (prepayment / trade credit / L/C) — agreed with the CFO?
7. Critical clauses (contractual penalties, force majeure, quality, arbitration) — prepared in draft form?
8. Supplier model (one strategic + back-up or a distributed portfolio) — chosen?
9. Delivery schedule (JIT / seasonal stockpile / hybrid) — planned with operations?
10. Contingency budget for spot (10–20% of annual volume) — secured?

If any point is left unanswered, it is worth closing it before you go to market — a trader receiving a complete RFQ replies faster and better.

BGT is open for orders for the 2026/2027 season. Deliveries from August 2026, volumes available in all key categories (PKS, sunflower pellet, olive stone, A1/A2 wood pellet). The sales team will prepare a preliminary offer with a proposed pricing formula, schedule and payment terms within 48 hours of an enquiry.