Pellet industry

[elkimmeg]

A lot of talk here is about the cost and supply of pellets this fall. Nobody has produced the cost of raw materials. Has the demand
pushed the pellet industry into purchasing prime lumber logs? In the past much of the pellet wood was a by product of the lumber industry or using less than prime lumber? Eric do you know the cost of logs for prime time lumber. NW fuels are you using more prime lumber to manufacture pellets? Is the industry also following suit? Has the demand stripped the source. Another question is, there competition for this source from the lumber industry, to manufacture chip boards and composit joist and framing members?

What about foreign competition buying up these resourses?

What I getting at is, the reasons pellet cost have increased. We all know every manufacturing industry has higher energy cost and insurance cost. The perception is the pellet industry is price gouging. It is easier to pay more if understanding production and raw materials cost have excalated. We all know freight has increased.

On cost, foreign buying of our scrap steel has produced a huge price increase of finnished steel products. Stoves cost have to increase. Framing high rise structures are switching over to engineered concrete beams and structured, because they are now cheaper than steel. Plumbing industry has made the move to PVC and Pex. Copper prices have risen to force that move. Again one reason given is all the scrap copper and manufacturing has left our country. At some point, will someone step forward and slow down the exit of vital raw materials, before the entire bank is lost? Each day it is getting too late to impose regulations, to restrict this mass exit. We are selling away our future and becoming more dependant of foreign politics / production. Is not this the same path or situation we are in with the oils supplies?. Our technologies are also exiting. When will our government wake up, when all is gone and its too late?

 

[Eric Johnson]

Pellets are still made from residue and very low-grade wood. There's so much more money in the higher grades that it wouldn't make sense to grind up anything but pulp-grade and worse wood.

The trouble, as you probably guessed, is that the price and availability of low-grade wood are volatile. All of the rain you've been having in New England just aggravates an already-serious supply situation. Given the choice, loggers will cut more valuable wood, so when there's a crunch or a weather-induced slowdown, the low-grade jobs tend to be ignored. Supplies drop. Anybody producing pellets finds themselves competing with other low-grade users like pulpmills and wood-fired power plants for the same raw material. When demand goes up, the price for low-grade wood goes up. Since nobody is going to shut down a pulpmill for lack of wood, the mills will pay what they have to in order to get the wood. Pellet producers either have to pay up or do without.

So, I don't think it's price gouging or, as HarryBack has suggested, profiteering on the part of investors. I think it's just that you have people in an emerging, rapidly-expanding industry who don't have the resources or experience or connections to guarantee an adequate supply of raw material in a cut-throat market.

Another thing to consider is that as sawmilling technology improves, there's less residue because more of the wood stays on the boards.

Right now there's no significant competition for U.S.-grown low-grade wood from abroad. If anything, it's going the other way. You might see boatloads of chips coming from Russia one of these days.

 

[elkimmeg]

Eric what about this being part of the theory. In my area the practice now for housing is to clear cut everything.
A huge mobarker is set on sight and everything is chipped into 80 yard trailers and driven to chip powered electric generation plants in NH. It use to be selective cutting and cut only what was needed. A lot more native lumber made it to the lumber mills.

 

[webbie]

Eric what about this being part of the theory. In my area the practice now for housing is to clear cut everything.
A huge mobarker is set on sight and everything is chipped into 80 yard trailers and driven to chip powered electric generation plants in NH. It use to be selective cutting and cut only what was needed. A lot more native lumber made it to the lumber mills.

Eric probably knows more, but my guess is that the lumber production from highly populated parts of New England is minimal when the entire picture is looked at. Northern NY State and Maine have vast supplies.

Even taken as a whole, I think the NE part of the US is nothing (in lumber) compared to the south, the west and canadian imports.

The rain may be bad for harvesting, but it is good for growth!

 

[Eric Johnson]

It's good for prices, too. Supply & Demand.

There are great markets for sawtimber in New England. The landclearing contractors grind up everything below a certain value, but I'm sure they pick out the decent sawlogs and sell them to sawmills. Sometimes they come through in advance and take out the valuable timber, then leave everything else for the landclearing contractor.

Pellet plants like clean residue, so the stuff coming out of the Morbark is only good for fuel. To use it for pellets, it would have to be debarked before being chipped in order to keep the wood clean. Pellet operations buy debarked sawmill chips when they can, but they're expensive and can be hard to find, so they can also buy logs and tree-lengths, debark them and then grind them up before drying.

Given current prices for hardwood sawlogs, nobody is going to chip them up on purpose. You might get the odd sawlog going into the chipper, but it's well worth anyone's time to sort that stuff out.

 

[smirnov3]

I'm waiting for the the switchgrass pellets, like the Canadians are starting to make. There are some folks in Vermont that are seriously considering it: they are going to run some experimental burns this winter with locally grown grass, and if it looks good, they will try to market it.

 

[cbrodsky]

A lot of talk here is about the cost and supply of pellets this fall. Nobody has produced the cost of raw materials. Has the demand
pushed the pellet industry into purchasing prime lumber logs? In the past much of the pellet wood was a by product of the lumber industry or using less than prime lumber? Eric do you know the cost of logs for prime time lumber. NW fuels are you using more prime lumber to manufacture pellets? Is the industry also following suit? Has the demand stripped the source. Another question is, there competition for this source from the lumber industry, to manufacture chip boards and composit joist and framing members?

What about foreign competition buying up these resourses?

What I getting at is, the reasons pellet cost have increased. We all know every manufacturing industry has higher energy cost and insurance cost. The perception is the pellet industry is price gouging. It is easier to pay more if understanding production and raw materials cost have excalated. We all know freight has increased.

On cost, foreign buying of our scrap steel has produced a huge price increase of finnished steel products. Stoves cost have to increase. Framing high rise structures are switching over to engineered concrete beams and structured, because they are now cheaper than steel. Plumbing industry has made the move to PVC and Pex. Copper prices have risen to force that move. Again one reason given is all the scrap copper and manufacturing has left our country. At some point, will someone step forward and slow down the exit of vital raw materials, before the entire bank is lost? Each day it is getting too late to impose regulations, to restrict this mass exit. We are selling away our future and becoming more dependant of foreign politics / production. Is not this the same path or situation we are in with the oils supplies?. Our technologies are also exiting. When will our government wake up, when all is gone and its too late?

Will be interesting to see what pellet prices do when this huge homebuilding boom dries up. The market clearly has - sooner or later the builders will realize, and then less prime lumber = less waste to make pellets... tough economy and high energy costs may increase demand for alternatives... could argue these may both lead to even higher pellet prices.

One could argue that America's greatest strength is finding the "next big thing" in all technologies so dumping steel and copper at exorbitant prices while coming up with smarter next-generation improved materials that will make many of those commodity applications obsolete in the coming years may not be a half bad strategy. Fiber optic to replace copper phone, for example; wireless internet to replace extensive cat-5 wiring, satellites to replace coax... these disruptive technologies have driven huge booms in our economy at one point or another.

Now if only our president would put some of this countries' great engineering minds to work on real energy solutions that would let us win the next major economic/resource war rather than tax breaks to the oil industry and expensive, antiquated warfare in Iraq, we might maintain our position in the world...

-Colin

 

[Eric Johnson]

You got that right, Colin.

I see my man Chuck Schumer is calling for an alternative energy "Manhattan Project." Even die-hard Republicans think he's a good senator.

I don't think any slip in housing starts will have an impact on the supply of raw material for pellets, at least not in the Northeast. Mills don't generally produce less lumber during slow-downs--they just sell what they produce for less. There are plenty of markets for hardwood lumber that have nothing to do with homebuilding. In fact, during homebuilding slowdowns, people put their money into upgrading the homes they have, and that includes landscaping, remodeling, etc., all of which use lumber, mulch and other forest products.

I think the pellet industry needs to become better established so that it can better compete with the existing markets for low-grade fiber. Nobody's going to go too far out on a limb for an industry that's just getting off the ground, and could crash and burn before it does. That's just the way these markets tend to work.

 

[Eric Johnson]

Well, I'd agree that he's different from the crowd running the country right now. You want to talk about very, very, scary. Those guys are insane.