who pushed the pellets price up quickly?

[lmei007]

I think we, the wood pellet comsumers, are one of the most important factors drive the pellets price goes up so quickly.

pleae read the information from New England Wood Pellet founder, Steve Walker, on the current wood pellet supply and demand issues in the Northeast. http://pelletheat.com/media/MessageToConsumers.pdf
He said it will be good if 25% of user buy in Spring. but this year, at least 50% buy in Spring. So it makes demand much bigger than supply and naturally the price will go up even if the oil price keep unchange.

I think we should think about this now. The price will hurt ALL of us even you get a good price this Spring but how about next Spring? Next Spring the price will based on the current price not this Spring's price. So you will be hit then. If we do the same thing next Spring the price will be drive up dramatically again and again, nobody from us gain. we all are losers.

But what we can do? I don't know. Maybe we are going to compete with each other again and again each year to see who lose less.

 

[Shortstuff]

In reference to what you are saying, I think it might be a good idea for us to place our orders for next year (the winter of '09/'10) by no later than January/February of '09 and request a specific delivery date - say first week in September '09. This way, the pellet retailers and pellet mills will have an earlier indication of the initial demand for the following winter.

Just a thought...

Steve

 

[GVA]

greed takes place within all industries pellet included.
The whole thought process that goes into people buying thier pellets in the spring is because they can get them cheaper at the end of the season when dealers wan't, or need to dump their old inventory.
kinda like the best time to buy a snowblower is in april rather than november...
They don't want to sit on pellets over the summer.
Most pellet manufactures set the price for the upcoming season in or around April........(for pellets not shipping)
Here is the problem the volume of sales is so high that the dealers (and those new brokers) are selling this falls inventory before they even have it.... This is a first..... Panic.... If I still lived up north I would, unless I had my years supply.....2005 was horrible for me pellets went from $175 to 300 a ton and in sept I still couldn't find any....
Back to the greed statement
if one can save money they will.
if one can make money they will.
This will most likely be a year when people go to find pellets at a dealer and the dealer will turn them away if they bought the stove elsewhere.....

 

[High Altitude]

It appears to me that everyone is in a panic and the pellet/stove industry is taking advantage of it.

Every time I talk to someone at one of my local dealers, they are all telling their customers that most stoves are out of inventory, better buy what is left, we have lots on order but we don't know if we are even going to get delivery, pellets are going up in price, get it now while we still have some in inventory, we don't know when the next shipment will be, prices are going up, prices are going up, prices are going up..........................

 

[webbie]

Welcome to capitalism and economics 101.

Customers do not sing kumbaya to each other and leave something for the next person! Each person makes their own decisions. The only other choice to that is rationing, and I don't see how we can implement that without complaint.....

Look around - the entire country is in a panic! A major bank just failed on Friday...and guess what? The large depositors are only getting 1/2 of their money (the Feds do not insure large deposits). Dozens of additional banks are slated to fail. How many people have IRAs. stocks or savings in places where they are not federally insured???? (answer: most people).

So as far as greed and "runs on the bank", pellets are pretty much lightweight and self-regulating......it's hard for the average customer to buy more than they need.......

 

[Hammerjoe]

This is a bunch of bull.
People buy in the Spring because thats when pellets are supposed to be the cheapest.
The industry found about that and here they are ready to jack up the prices to screw consumers, this is the same mentality as the oil industry.
If the demand is high then increase production, dont come up with excuses to justify increasing prices.

As someone else said, greed.
If consumers know that prices are lower in the Spring and thats when they buy their stock for the winter, why dont the pellet manufacturers know about it?
And this is not the first time, remember what happened a few years ago, they got caught with their pants down, and who paid for it?
Consumers off course, who else?
What kind of business is this that has no clue on whats going on?? It worries me.

 

[kilarney]

This is a bunch of bull.
People buy in the Spring because thats when pellets are supposed to be the cheapest.
The industry found about that and here they are ready to jack up the prices to screw consumers, this is the same mentality as the oil industry.
If the demand is high then increase production, dont come up with excuses to justify increasing prices.

This really isn't fair. A small percentage of people bought pellets in the spring because they were cheap. The plants liked this because they could clear out the prior year's inventory.

This year, everything changed. Many more consumers demanded pellets early. The plants are running 24/7 to keep up with this demand. I don't know how you expect them to just increase capacity. They are running at capacity right now.

Given the enormous increase in demand, prices have actually remained relatively stable. I'm actually very impressed by this.

The real test this year will be the pellet supply come winter. If everyone pre-bought, there will be a glut of pellets later on in the year. If this has more to do with an increase in demand, then we're in for some trouble.

 

[mralias]

Let see if I understand this. Oil prices are going up up up and yet the pellet manufactures did not see this coming???? Looks to me like controlled supply and demand. You know, why let the oil companies make the windfall profits.

 

[webbie]

Well, let me put it another way that might make more sense to some.....

Time comes to sell your house. Your house is in a great neighborhood and you paid 200K. You fixed it up nicely - put 20K and a bunch of work into it.

But there are very few houses like yours on the market - so the house can be sold for $375K easily.
Problem is, that locks out a lot of potential buyers, those who need your house the most cannot afford it.

So, what would you do?

1. Sell the house for $300K because that is still a great profit and you can feel good about it.
2. Sell the house for what the market says it is worth, 375K, thereby locking in the most profit for you, and locking OUT many potential buyers who really want it.

If you can answer #1, then you have a right to complain about pellet prices. These companies (like NEWP) have taken a LOT of chances - a lot of risk, and invested a lot of money. They have multiple investors (like you and I) who DO NOT want to sell our house for 300K when we can get 375K. Pretty simple, really.

I have nothing but respect for ALL of the people who started and invested in these plants....I certainly would not do so with my hard earned money (I'm too conservative for such things).

At the same time, their mission is to provide you with good quality pellets at MARKET prices with supply to the extent that their production allows.....PERIOD. Price is always negotiable.

 

[mkmh]

I agree. I don't think it is productive to be pointing any fingers here. The economics of the situation are complex, but clearly the root of the issue is high petroleum prices (we won't discuss the root of THAT problem here).
Those prices are driving up the cost of everything, and lots of Americans are really feeling the squeeze. I would argue that many people in the pellet supply chain (from pellet mill owners, to stove/pellet dealers, all the way through the Craig's List resellers) are feeling squeezed by economic conditions. Lots of folks just trying to survive in a dog eat dog economy and if they can turn a few extra bucks on a ton of pellets they are going to do so. I don't think you have a lot of millionaires in the chain looking to push their personal profit up even higher. Mostly middle class Americans trying to make a few extra bucks to support their families. Love it or hate it this is the way capitilism works.

It will be interesting to see if the NEWP CEO's explaination winds up being correct. He makes it sound simple...like last year 10,000 out of 40,000 stove owners bought their pellets early -- This year 20,000 of 40,000 owners bought early...so we have a shortfall of X thousand tons. We'll catch up over the summer, fall, winter.
However, the real X factor is the number of new stove owners. In the example above, if the number of stove owners increased to 60,000...then that sure changes the game a bit. I'd feel better if we could see some stats on hown many thousands of tons more pellets have gone to market this year over last year. And also, how many thousand tons more will be going to maket in the fall.
If US and canadian pellet production is up 50% over last year then I don't think we have much to worry about...but i'm not sure that is the case.

One very positive thing to keep in mind is that most if not all the dollars flowing through the pellet industry are staying in the US and/or Canada. Any profits that being made along the way are at least going to North American companies and people. It is hard to feel as good about money we pump into the oil & gas industry.

 

[slls]

Basic supply and demand, if no body wanted them there would be plenty and low price. A supplier in my area is backed up 1000 tons, talk about demand.

 

[JustWood]

A few thoughts.


I think steve is trying to save face and is blowing smoke.

NO ONE and I mean NO ONE in the wood industry is getting rich right now.

If you want to blame someone blame yourself for not being prepared or listening to advice here or blame the people who took out the mortgages they couldn't afford creating foreclosures that are decimating the entire forest products industry OR at least blame the oil companies and speculators for creating an energy market where prices are escalating on everything but DON'T blame the other guy who is stocking up on a 1-2 year supply of pellets.

I find it hard to believe the pellet industry didn't see this coming a year ago. I started to see major changes in the forest products industry in Aug and Sept that made me rethink my business strategy.

 

[BadDad320]

I guess guys like me are part of the problem with supply. I have oil heat. Last year I got hammered. This year looked like it would be even worse. I researched solutions. Pellets seemed the most reasonable. I bought a Thelin Parlor 3000 and proceeded to buy 5 tons of pellets. All are in my possession. There was no way I was getting caught short. Since this is my first year I did not know how many tons I needed. Some said 2 tons, some 3, some 4. I said to myself.... I'll get 5 and if some are left I'll have a head start on next year. So new entries into the pellet market...... not sure of exactly what they need is effecting the market. Next year I'll have a more realistic idea of exactly what I need and buy accordingly. Sorry for any inconvienience I may have caused. BadDad320............................

 

[TboneMan]

A few thoughts.

I find it hard to believe the pellet industry didn't see this coming a year ago. I started to see major changes in the forest products industry in Aug and Sept that made me rethink my business strategy.

Actually, I think they did see this coming. Why else would NEWP build a new 100,000 plant near thousands of acres of forest (upstate NY). They actually saw it more like 5 years ago given planning/permitting/construction of a new plant.

I took delivery of my 5 tons on Friday. These were NEWP straight from the new plant. In fact the bags were still HOT (talk about fresh produce).

I chatted with my supplier while we hand stack two of the 5 tons. This supplier indicated that NEWP has plenty of wood and lots of orders. They just need time to make the stuff. Having been to the plant, it is obvious there is little opportunity to "speed up" production.

The online dealerships have really done a booming business this year. My supplier is having to adjust his deliveries based on his allotment from the plant. He said customers will get all the pellets they need, they might not, however, get them all at once.

 

[trailblaster]

Heating oil and propane have risen (or doubled) faster than they ever have in a matter of a year. so everyone is looking for other sources of heat.Here in New England, we are the biggest users of heating oil in the country and its current price is scaring everyone especially those on fixed incomes. Now, we may be overthinking that because the bigger demand thats being created for wood and pellet heat makes us think that we better get our supply now and fast. Now if everyone thinks that way, does that mean that demand for this solid fuel is now and very few people are actually waiting for Fall to buy them? If this is the case, then wouldn't the pellet and wood off-season for buying now be in Fall because everyone was afraid of the ultra-high demand for it in Fall. this could create a surplus in fall because evryone would already have their years' supple on hand.

 

[mkmh]

I guess guys like me are part of the problem with supply. I have oil heat. Last year I got hammered. This year looked like it would be even worse. I researched solutions. Pellets seemed the most reasonable. I bought a Thelin Parlor 3000 and proceeded to buy 5 tons of pellets. All are in my possession. There was no way I was getting caught short. Since this is my first year I did not know how many tons I needed. Some said 2 tons, some 3, some 4. I said to myself.... I'll get 5 and if some are left I'll have a head start on next year. So new entries into the pellet market...... not sure of exactly what they need is effecting the market. Next year I'll have a more realistic idea of exactly what I need and buy accordingly. Sorry for any inconvienience I may have caused. BadDad320............................

LOL -- For what it is worth I forgive you BadDad!
It is the country we live in. Look out for yourself and your family first because nobody else is going to. I don't see a downside to buying early. If it has a negative impact on the market then so be it. Is Steve from NEWP going to come heat your home if he isn't able to meet demand the way he says he will? Will the government come in and heat your home?
If I could store 3 years worth of pellets (15 tons) I would buy them at today's price in a heartbeat without much thought to the implications to the market.
It is a nice thought that all the pellet heads should get in a neat and orderly line to get their pellets as they need them, but it just ain't going to happen. If consumers don't buy up supply as it comes to market then you're probably going to see some other entreprenuer jumping in and snatching it up with the idea of sitting on it until some sweet spot on the supply & demand curve.

I give 10% of my pay to charities every 2 weeks, and I volunteer when I can. However, I'm not willing to take on personal risk with my heating situation with the thought that I "might" be helping some other family get their pellets earlier. That whole thing is for the pellet producers and distributors to figure out. I will continue to try to always have at least 2 tons in reserve and will always be seeking deals when there is a "glut" in supply.

 

[mkmh]

If this is the case, then wouldn't the pellet and wood off-season for buying now be in Fall because everyone was afraid of the ultra-high demand for it in Fall. this could create a surplus in fall because evryone would already have their years' supple on hand.

This is what i'm interested to see. Personally I don't think so. I think the March-Present spike in demand is from the somewhat proactive crowd buying stoves and pellets. There will be a whole another round in the fall...though there probably won't be many stoves to bring those folks online.
My gut tells me that all the plants will be at peak production for the foreseeable future.

 

[arthurlange]

Its Pretty easy to explain. Diesel is up = Transporation (freight) costs are up.
New home construction is down = less raw materials = higher price for those materials.
More people burning pellets = more demand = more shifts or more employees at these mills.
In the old days (5-7 yrs ago) from what I hear, the pellet mills would get sawdust for free, now with everyone( wood flooring and furniture manufacturers etc..) seeing the money they are making, they too want their piece of the pie.. charging for sawdust (raw materials) that they used to give away.

 

[Eric Johnson]

A few thoughts.

I find it hard to believe the pellet industry didn't see this coming a year ago. I started to see major changes in the forest products industry in Aug and Sept that made me rethink my business strategy.

Actually, I think they did see this coming. Why else would NEWP build a new 100,000 plant near thousands of acres of forest (upstate NY). They actually saw it more like 5 years ago given planning/permitting/construction of a new plant.

I took delivery of my 5 tons on Friday. These were NEWP straight from the new plant. In fact the bags were still HOT (talk about fresh produce).

I chatted with my supplier while we hand stack two of the 5 tons. This supplier indicated that NEWP has plenty of wood and lots of orders. They just need time to make the stuff. Having been to the plant, it is obvious there is little opportunity to "speed up" production.

The online dealerships have really done a booming business this year. My supplier is having to adjust his deliveries based on his allotment from the plant. He said customers will get all the pellets they need, they might not, however, get them all at once.

I just want to point out that there's a HUGE difference between trees in the ground and usable raw material for pellet manufacture. That's like saying "California has all that ocean around them, so why is there a water shortage?" Standing timber has to be bought, harvested, processed, transported, processed some more, etc. And each of those steps has an associated (and rising) cost and set of risks and uncertainties associated with it.

Part of the problem with the Schuyler plant is that when it was planned and sited, there were a lot more sawmills in business in the region to supply sawdust and clean chips. Many of those mills have gone out of business over the past year or two, and now NEWP has to compete with more traditional consumers of residue, like pulp and paper mills, for a dwindling source of raw material. And what it can't buy, it has to hire somebody to make from standing timber, which adds considerably to the cost. Econ 102, I guess.

 

[JustWood]

A few thoughts about what could cause shortages this fall and winter.


The midwest and New England have seen very wet weather recently. What little bit of logging that has taken place has been shut down by foresters and landowners making for tight log supplies at mills (what few are left) that should soon be building inventory for fall and winter.

The trend now and the near future towards sawing low grade (rail ties and blocking) takes 50% of available sawdust off the market because of less saw kerf.


Emerald ash borer . This could work 2 ways. In parts of Ohio and Mich where it has been found I have heard that ash logs and tops must be burned at the log landing and NOT transported anywhere. More useable wood unavailable for pellets.
Or if the USDA finds the ash borer is heading toward New England but not there yet and all landowners with ash in their woods decide to harvest at whatever little profit to avoid a total loss then there will be some chips and dust available for the pellet manufacturers.

I have been talking with a pellet plant myself about hauling them some clean wood waste (for grind feedstock) we have been handling for many years and I just can't make the #'s work. My transport costs alone are almost as much as what they are paying for chips. I can make more $ selling this waste as campfire or furnace wood right here locally without hauling it half way to the moon. They definetly need to come up in price to make it profitable for their suppliers or they will have no suppliers.

 

[stoveguy2esw]

i thopught the most interesting statement he made was that they had only produced 25% of the planned amount they intended to make for the year, and this is july , im not sure when the link was posted , but if this is the case clearly they had not been running flat out in the spring like they are now , or they would have produced a higher percentage of their projected production.

thats said , usually in years past the manufacturer was extatic to recieve spring orders as stated above by one member , to clear the last of the previous season's inventory. now , with the huge increase in stove sales this year and more folks catching on to the pricing fluctuations (not to mention a late spring in a lot of the country this past season) the product in question is quickly becoming less a "seasonal " item and is becoming a more mainstream , year round supplied commodity. so to put this simply , if the suppliers need to produce year round to keep up with demand , the plants must pay labor and material costs for the rising demand , this raises the price cause to make that much they have to get more stuff and run more hours at their plant. this is what raises the price.

we have had the same "seasonal" existance as the pellet mills at ESW in the past. running hard for 6 months and scaling way back in the winter/spring. to give an example , i believe when i started at ESW in 1993 we shiped about 12-13 thousand units. most all of that was july through november. rest of the season we built stoves but at a slower pace not working as many hours and just easing through the dead time of the slow season. fast forward to the present , we shipped over 6K stoves last month alone and are projecting another 9K this month , and its not even fall yet. thats more than we shipped in the entire year in 93. now we run virtually year round with very little "off season"in order to have stock for early buys and to have enough built to sustain orders when the big customers come calling. this means a larger workforce , more hours for the guys and subsequently more stable prices to our retailers year round i imagine. the pellet mills must be running into the same issues (not that anyone is unhappy. it means that our employees are making more money annually as they are working more hours , that in my mind is a good thing , im sure the guys at the pellet mills are happily doing so as well. as Web stated, capitalism at work.

if this keeps up , in the end it may mean that the "sweet deals " on pellets in the spring may go away , but with the increased capital from the higher volume of sales means that the mills (and stove builders) can run a more stable less seasonal schedule which will likely keep pricing stable year round , and also more importantly keep stock availible with less chance of the dreaded "what did the pellet plant burn down" threads that always show up in january.

at least thats how i see it