Sluggish demand for wood pellets (Newspaper article)

[hoverfly]

I agree the price of pellets must come down. The glut is also from pallet pigs who had horded several year worth and have not bought any this year. Supply and demand rules, however oil has doped around 70 bucks a barrel. Pellet producers may have a dry spell until demand picks up again.

If there was all that multi year hoarding going on please explain the 2008 pellets that are sitting at the Wal-Mart one and a half miles from me?

Who said any thing about multi year hording? Two years ago pellets were much cheaper and while oil prices sky rocked people horded pellets causing a shortage. Right?

"The glut is also from pallet pigs who had horded several year worth and have not bought any this year."

I do believe you did, even getting the name of the so called horders wrong I might add ;-) .

Having paid my dues, hey Eric did you get your cut yet, I must defend my fine brother and sister pellet pigs.

Wow touchy person you are over a miss spell? Did I insult you?........sniffle!

 

[minnow]

Mills and consumers have to share the blame for the tough times the mills now face.

Consumers have short memories and many have given up burning pellets because the don't see the immediate benefit with oil being more reasonable. Mills will close, oil will eventually rise again and the consumer will be upset that the supply is no longer there. Same thing has happened with residential solar even with unlimited tax credits.

Mills charged more in 2008 because with $5 heating oil, they KNEW they could.
They stayed high in fall 2009 becuase they THOUGHT they could.
They will reduce prices in 2010 or close becuase they HAVE TO.

If oil goes back through the roof then the mills will re-open. The producers are responsible for the fix they find themselves in this year. When prices started to climb three years ago, we were all told that it's was because of transportation costs (diesel fuel for the flat bed tractor trailers). Seemed reasonable at the time. But then fuel costs fell and pellets continued to go up and up significantly (from $225 ton to $300 ton). And the industry when questioned now blurted forth the excuse that raw materials were in short supply. Of course that flies in the face of all the new pellet plants that have come on line just this year. Doesn't it seem just a little odd that if raw materials were in such short supply newcomers to the pellet producing world would have thought twice before making the investment in the first place? At the same time, natural gas, propane and fuel oil fell just as significantly. So now traditional heating products are more cost effective to use once again and as just as importantly we can return to heating the entire home as compared to a room or two with an assortment of floor, corner and small portable fans blowing cold air this way and hot air that way in a futile attempt to make our pellet stoves act like our old central heating system just to keep the bedrooms above 40 degrees.
No the producers have made their own bed this year and I say let them lay in it.

 

[Augmister]

Why would oil go up in a Depression? It will collapse like everything else... If you are so vindictive about the producers and flip them off, then don't expect a supply of pellets down the road.... bet your pellet stove will make a great planter on your front lawn!

 

[Stentor]

Why would oil go up in a Depression? It will collapse like everything else... If you are so vindictive about the producers and flip them off, then don't expect a supply of pellets down the road.... bet your pellet stove will make a great planter on your front lawn!

I'm not saying that I know if Augustine is right or wrong, but I know the future prices of pellets are hard to predict. "Macroeconomic" predictions about Depression or recession or jobless recovery or power shifts to Asia, etc., are at a different level than our specific day to day or season to season heating plans. For example, in my case I need to decide when to buy four tons for the 2010-2011 winter. Even if I had the impulse to buy a trailer's worth, I don't have the space and for many reasons I don't think it would be a prudent purchase anyhow. The question for me is whether I buy in, say, May or later.

The follow up question is what rule of thumb or guideline I should employ to make my purchase decision.

 

[minnow]

Why would oil go up in a Depression? It will collapse like everything else... If you are so vindictive about the producers and flip them off, then don't expect a supply of pellets down the road.... bet your pellet stove will make a great planter on your front lawn!

How do you explain then why pellets went up $75 a ton just this year ? I'm not so enamored with my pellet stove that I feel obligated to use pellets regardless of the price.

 

[Pellet-King]

Like oil/gas, the price of pellets were flat for many years since i started in 1999, i was paying $130 a ton till about 3-4 yrs ago, first i saw a local store selling them for $180, i thought not buying from them!!
They made profits back then, i even bought them at walmart 5-6 yrs ago for $100 in the spring, i know BTU you dont want this to happen, but it's beyond your control, what will happen is pellet mills will close and the lack of pellets that started all this high prices will be back again.

Stoves sales must be flat too, who wants to spend 4k+ on a stove and $300ton for pellets when oil is affordable?

I would never get on board now, if my stove dies and beyond fixing i wont buy another......

 

[ChandlerR]

My feelings on my pellet stove is this.....I burned wood for years and years and used it as my primary heat source for most of that time. I didn't have to but I liked the heat and the ambiance of the stove. I feel the same way about my pellet stove. Yes, oil may be a bit cheaper but I like the way my living room is toasty warm. I like watching the fire and there is nothing like waking up in the morning and walking into the living room and discover it's still 70 degrees. Much better than the cool house I would have if the oil monster was in charge. It has little to do with saving money (although a deal is a deal)

By the way, my old boiler crapped out a couple of years ago and I spent a little extra money and bought a Buderus boiler with the Riello burner. I installed it myself and it is very quiet and efficient.....and I have no problem letting it sit cold and lonely in the cellar.

Chan

 

[bdeyes]

Like oil/gas, the price of pellets were flat for many years since i started in 1999, i was paying $130 a ton till about 3-4 yrs ago, first i saw a local store selling them for $180, i thought not buying from them!!
They made profits back then, i even bought them at walmart 5-6 yrs ago for $100 in the spring, i know BTU you dont want this to happen, but it's beyond your control, what will happen is pellet mills will close and the lack of pellets that started all this high prices will be back again.

Stoves sales must be flat too, who wants to spend 4k+ on a stove and $300ton for pellets when oil is affordable?

I would never get on board now, if my stove dies and beyond fixing i wont buy another......

Pellet King

I believe some of this is already happening. Mills have already been affected. I believe 2 years ago if I remember correctly two somewhat larger mills close down. I also read this morning that several have cut back staff. I had a situation that required me to have to get in touch with one of the larger distributors and he was explaining the impact it had on them and felt that this situtation will most certainly force other mills to close. Do not want to see that for many reasons but as you stated it is beyond the manufactuers control.

 

[Augmister]

Why would oil go up in a Depression? It will collapse like everything else... If you are so vindictive about the producers and flip them off, then don't expect a supply of pellets down the road.... bet your pellet stove will make a great planter on your front lawn!

How do you explain then why pellets went up $75 a ton just this year ? I'm not so enamored with my pellet stove that I feel obligated to use pellets regardless of the price.

My pellets cost me the same as last year...you claim up $75 a ton? Where do you live? Nobody is making anyone use any one kind of fuel... we still have freedom of choice. I burn pellets because we are rural and gas is out. We don't have an oil burner and using only three tons for the year still keeps us between $800-900 a year for heating cost, which I consider cheap!

I paid $270/ton and got my pellets last April. I see deals where I could get them now in the $240 range.... about $100 less on a 3 ton lot. I can't get my underwear in a knot over a $100 difference. I guess I am "rich"? LOLOLOLOL

I figure I will get my pellets again in April-May and they will be in the $240-250/ton range. Less, if there is a great overhead supply as many here claim. As a commodity, you are never going to hit the low price every time.

It is important to understand the macro economic conditions, as these will greatly effect the supply-demand-price issues (pellets and all other manufactured products) going forward. Americans are economic ignorant and will soon realize the worthlessness of paper money. The current rush to the dollar as the European Union states collapse (Greece, Ireland, Portugal, Spain -presently) is like having the people who left the Titanic in lifeboats, rowing back to the ship, to get back on. I am seriously thinking of dumping my second pellet stove for a conventional wood stove. If the supply of pellets drys up, forcing the price to spike, I can wander into the woods behind my house and harvest trees to keep warm for many, many years..... I see pellets less expensive short term and plentiful in supply. Two years out is the BIG question, when the global economy is el fuego.

 

[bdeyes]

Why would oil go up in a Depression? It will collapse like everything else... If you are so vindictive about the producers and flip them off, then don't expect a supply of pellets down the road.... bet your pellet stove will make a great planter on your front lawn!

How do you explain then why pellets went up $75 a ton just this year ? I'm not so enamored with my pellet stove that I feel obligated to use pellets regardless of the price.

My pellets cost me the same as last year...you claim up $75 a ton? Where do you live? Nobody is making anyone use any one kind of fuel... we still have freedom of choice. I burn pellets because we are rural and gas is out. We don't have an oil burner and using only three tons for the year still keeps us between $800-900 a year for heating cost, which I consider cheap!

I paid $270/ton and got my pellets last April. I see deals where I could get them now in the $240 range.... about $100 less on a 3 ton lot. I can't get my underwear in a knot over a $100 difference. I guess I am "rich"? LOLOLOLOL

I figure I will get my pellets again in April-May and they will be in the $240-250/ton range. Less, if there is a great overhead supply as many here claim. As a commodity, you are never going to hit the low price every time.

It is important to understand the macro economic conditions, as these will greatly effect the supply-demand-price issues (pellets and all other manufactured products) going forward. Americans are economic ignorant and will soon realize the worthlessness of paper money. The current rush to the dollar as the European Union states collapse (Greece, Ireland, Portugal, Spain -presently) is like having the people who left the Titanic in lifeboats, rowing back to the ship, to get back on. I am seriously thinking of dumping my second pellet stove for a conventional wood stove. If the supply of pellets drys up, forcing the price to spike, I can wander into the woods behind my house and harvest trees to keep warm for many, many years..... I see pellets less expensive short term and plentiful in supply. Two years out is the BIG question, when the global economy is el fuego.

Augustine

I am sure not all will agree But I for one beleive your comment appears accurate and well worded....

 

[Amaralluis]

No the producers have made their own bed this year and I say let them lay in it.

I cant agree more.

The oil sheiks might live in Saudi Arabia, but we have our own sheiks here right at home.
Granted we are talking different kind of greed but it exists here.
Pellets here in the Maritimes Canada have increased more than 100% in the last three years and we have 3 or 4 mills producing pellets. A couple of them are using their own waste to make pellets.
The stores are now bringing pellets from other areas but guess what the price are all the same in all the stores and no matter what brand, no matter where the pellets are made.
The pellets made 100km's away cost the same as the pellets made 1000kms away... huh??
And then like the oil executives they have the excuses flying to justify increases, it was because of oil prices, but oil prices crashed and I am still paying the same high price for the pellets, then its because of shortage of raw material, but then more mills are opening and I am still paying the same high prices.

No, I would not buy a pellet stove these days either. The sheiks in this industry are as bad if not worse than the oil sheiks... FML.

 

[minnow]

[quote author="Augustine" date="1265571562]

My pellets cost me the same as last year...you claim up $75 a ton? Where do you live? [/quote]


I live in upstate New York. Last year (2008) Barefoot pellets were $225 pre-buy. The year before that, they were $190. This year, pre-buy were $300.00. Other local retailers were in the $275 to $300 range for a variety of brands. This is the first year that I can remember where it actually paid to wait until December to buy as prices have continued to fall. When was the last time that happened ? And why did it happen ?
In the area where I live, people heat homes using wood, oil or propane (we don't have natural gas). Oil and propane dropped dramtically this year and many homeowners do the pre-buy programs available in the summer from the oil and propane dealers. So just as pellets were at all time highs this summer, oil and propane pre-buys were down and way down from last years levels. By the time the pellet producers woke up and brought prices back down to a resonable level, many of us had already pre-bought our oil or propane supplies for the year. Now I will admit at price per gallon of oil I bought and the amount of gallons needed cost me about $100 more than if I have bought my winter's supply of pellets even at $300/ton. However, with my oil furnace, I can keep my entire home warm as compared to a couple rooms nice and warm and rest of the house chilly. Next year if oil is within $200 bucks of pellets, I'll stay with oil. If it's more than than that then I'll buy pellets. The bottom line is that $300 for pellets is outrageous.

 

[minnow]

I agree with regarding our dependance on the Middle East. However I see little difference between the energy thieves over there and the home grown variety. Pellet producers wrongly bet that oil prices would continue the out of control upward spiral that we saw last winter and saw an opportunity to gouge us. Newcomers to the pellet producing world thought they woud jump on the bandwagon and built several new plants this summer as well. Fatal combination of oversupply at an unsubstainable price. As we know oil prices crashed and pellet producers were as slow as molasses to react. By the time the producers realized stock was moving too slow and was over priced, many of the their consumers had returned to oil, propane or natural gas. Pallets and pallets of unsold pellets began to become stockpiled. The big box stores basically had to have a fire sale to rid their parking lots of unsold pellets. What I hope for is that the industry has learned a lesson (however I doubt it). There is a price point that pellet buyers will not cross. I hope your right on spring pre-buy as I'll be tempted at $225.00. But then again, how many that pre-bought at $250 - $300 this past year are thinking that prices could come down later in the year like they did this past fall and winter and may not want to jump too early again ?

 

[Ladderlieu]

This is my take on the whole matter: Last year pellets were available in my area "early buy" @$225 a ton. This year the same dealer offered "early buy" on the same product @$279 a ton with a minimum order of 3 tons. At the same time, oil was @$1.90 a gallon. I filled the oil tank to have as anOPTION so that I could have an alternate fuel source if pellets were more expensive. Initially pellets rose even higher after the "early buy" period, but as fall approached they dropped. At the same time, oil rose. I chose to use oil while the grandchild was roaming the house, and pellets when not. I was buying 6-10 bags of pellets at a time and bringing them home in the Toyota. Kept burning oil and pellets until January when pellets were much less per ton. You can find them as low as $199 a ton if you look around now.
For me it was all about comfort AND what I could afford. In a perfect world, pellets would remain at such a price that they would be the least expensive way to heat the house. I DO realize that when the price of oil goes up, the price of production and delivery HAS to increase. But I absolutely LOVE the way the pellet stove feels. Forced hot air heating will NEVER offer the same feeling. If pellet prices remain at their current price or drop during the spring sales, I'll probably do my best to pack every free spot in the house with pellets to last quite a long time.

 

[Bigjim13]

This has been an interesting thread and I hope it continues. What I have taken from the thread is that nobody really knows where prices will go. Some say they will go down, other say they will stay around the same. In my area I have a little of each. Some places have dropped their prices while others, mainly TSC, have kept their prices really high (IMO). The TSC store in my area has had a variety of brands this year all right around $6/bag, not sure what the deal was for a ton but I'm guessing around $275/ton. Other places, like HD, have dropped to under $5/bag- I guess it depends on the store. I haven't gotten any pre buy prices yet so I am curious to see what they will be.

My wife and I originally bought the stove to save over oil, it was a big savings when oil was almost $5/gal and this year we saved a couple hundred dollars. My thinking has changed though, its not just about saving $ anymore. I like not having to worry about where oil is going. Another thing, unless something major happens with my stove (knocking on wood while I type this) I can trouble shoot it and figure it out. I can't do that with my oil furnace. And finally I think there is something to be said in what BTU is saying about getting over our addiction to oil. Why did gas prices hit $4/gal? However many people you ask is how many different answers you will get, but I think mainly it was specualtion. Hopefully the pellet market doesn't get to the point the oil market is in now with so many swings it's hard to keep track. It is nice to be able to support a local product and local jobs which is huge in today's market and world.

 

[wil lanfear]

Maybe it's time that the pellet manufacturers put a suggested retail price per ton on pellets, advertise it, excluding shipping costs, same as the auto industry does. I believe by doing this, the consumer then will be able to figure out who is responsable for the high costs of pellets. However, this doesn't mean that a pellet retailer can't sell below the suggested retail plus the freight cost.

 

[rickwa]

It seems that pellet prices have in the past been determined by "what the traffic would bear"as opposed to just making a reasonable profit. From what I have seen the traffic will not bear the current price of pellets. Fewer mills running at full capacity will be able to produce cheaper than more mills running at partial capacity.

 

[minnow]

BTU Wrote, "Pellets are a commodity, subject to price swings just like all commodities and I don’t know what you will pay for pellets in your area this spring, but I bet it will be closer to the $225 price, than to the $300 price of last year. That’s deflation, or supply and demand at work. Yet you will still buy the slightly higher priced oil."


I will continue to use oil if it's within say $200 of pellets. My rationale is this: In Upstate NY, we need heat about 6 months out of the year (Nov-April). At $200 over the six months that works out to be $33 a month or a little more than a dollar a day. For that dollar a day I don't have to clean the pellet stove every week, scrape the burn pot every day, make four trips to the retailer to p/u the four tons of pellets I need, off load the truck, stack 200 bags in the garage and hump two bags per day into the house. With oil, I call the retailer, send a check for the pre-buy amount and turn the thermostat to set-back mode in November and forget about it until the end of April. The entire house is warm as compared to using the pellet stove where half the house is chilly. All for about a dollar a day. I'm glad I have my Accentra Insert and since 2005 I have saved enough using pellets over oil to pay for the stove ! But that was when pellets were $175 to $225 range. It made great fiscal sense then. This year it did not - certainly not at $300/ton. And who knows what next winter will bring.

 

[coobie]

Pellet prices(pro-pellet)were $217 a ton when I bought them in august they are now $229 a ton not much change.I did check with a local lumber yard and the salesman told me if I bought 5 ton now he could sell them for $199 a ton.coobie

 

[newf lover]

I'm with Bigjim13 on this one. Even though I had been thinking about a pellet stove for awhile, the price of oil in 2008 pushed me to actually buy one. Our great room had been freezing and we usually lived with the house temp at 61 or 62. With the pellet stove, it's now consistenty 70, and we love it. I don't mind cleaning the stove, and while we're not rich and it would be nice to save money, I will burn pellets even if it costs more. The house is comfortable, I love sitting in front of the fire, and it's a different kind of heat. There's also something attractive about not buying oil.

 

[Bigjim13]

I'm with Bigjim13 on this one. Even though I had been thinking about a pellet stove for awhile, the price of oil in 2008 pushed me to actually buy one. Our great room had been freezing and we usually lived with the house temp at 61 or 62. With the pellet stove, it's now consistenty 70, and we love it. I don't mind cleaning the stove, and while we're not rich and it would be nice to save money, I will burn pellets even if it costs more. The house is comfortable, I love sitting in front of the fire, and it's a different kind of heat. There's also something attractive about not buying oil.

I too like the fire in our living room, its just nice. It had previously been heated with a propane fireplace insert, which was fine. Our furnace wasn't built to heat that room, that room was part of an addition that was added who knows how long after the original house was built. So, the furnace never heated that room all that well. Now with the pellet stove, we can sit in the living room and be nice and toasty while watching TV, reading etc. I don't mind cleaning the stove really either, it gives me something to do in the winter since I don't ski, snowboard or snowmobile!