West coast pellet prices!!!!!!!!!

[moralleper]

What is the deal with West coast pellet prices? the best price I have found so far is $189 a ton for Bear Mountain. Are other seeing similar prices? last year I was getting pellets for $149 a ton.

 

[Hogwildz]

The hardware store in town is having a preseason pellet sale here. Prolly getting rid of last years surplus.

 

[restorer]

Got my first quotes today. Sutherlands' last years supplier will have pellets about the 15th of August, for $4.49 per bag, so pallet discount(so far) that's compared to $3.19 I paid a year ago. That's a 40% increase. These are Heartlands, and burn very fine. Checked with HD and Lowe's, but they don't even have a listing on their computers, should be soon as Lowe's has started it's seasonal closeout sale, get your BBQ now. My closest plant is so bad in quality, I won't touch it, there are two plants 75 and 150 miles away. I can get 8 ton at $150 per ton picked up at the mill, but the fuel makes it close to $180. Eureka may or may not be available at Sutherlands, but they will not know until mid October as they are two months behind in processing. The conversation has not started with Sutherland's manager, a nice guy, so I hope I can get a break at 4 ton paid upfront and spaced delivery, a ton a month from August to December, doesn't wipe out their stock too fast as last year the Heartlands stopped in December with extra demand. Spent around $700 total for heating last year, may cost and extra two hundred, but with the new stove in the shop, and even heating, I may get by with three tons.

For Real Hot,

You are now going to pay the more competitive price enjoyed by lots of others around the West. The demand is up there and the dealers have made their bids, no local preference.

The Idaho Company I deal with had a 30 day guaranteed price quote, but an eight ton max purchase limit. The VP told me today they could sell all they have to one buyer, but feel obligated to supply the long time customers that depend on them. Their price is like the good old days, but it's FOB their yard. trying to figure out how to make a four ton run, one time with the van and trailer. It really pushes the load capacity.

Best to buy what you can before August 15, as that seems to be the scary jump date.

 

[hearthtools]

my Summer price is $260 ($285 the end of last winter)
Im in Central California.
a lot of it has to to with shipping cost.
Trucking cost is much higher.
I will say this over and over again My pellet cost has only gone up $15 in the past 5 years but my trucking cost has almost doubled.
I am making my same $20 or so per ton after all cost.
Not much money in pellets. I just do it as a service for my customers that cant drive 120 miles round trip to the big box stores to get the cheep pellets fuel.

im now selling Surefire. a new pellet mill that a Large lumber mill started up. All material comes from on site or from their own mills in Canada.
Before you ask why not buy from closer mill in USA? Because they CANT supply or work with my Delivery time terms. I have in the past 19 seasons and it always was frustrating getting loads when I needed them. with the Canadian Mills they send me trucks when I want them the Day and time I want them.
THE USA COMPANIES WANT YOU TO BUY MULTIPLE TRUCKS AT A TIME AND STOCK PILE. Not enough money or Storage for me to do that.

 

[Shane]

Wow 4.49 per bag for my favorite pellets. Think I'm slowly making the transition from pellet head to wood burner. I like the convenience etc. but 4.49 per bag is well past the point of saving money. The pellets provide a warmer heat than gas but gas is half the cost now. Anyone want a Lopi Yankee in decent shape? I am seriously going to make the move. Just need to round up some cash for 24' of stainless dense packed chimney. Ouch. Especially now that I pay retail for everything. The past couple of years I've been patient waiting for the pellet market to even out prices to come down but they aren't and it's not really anyones fault. The market forces are just against pellets, the transport kills them, the raw material for some reason seems to be in short supply, it's just to a point where I don't know if I can go another winter not knowing if me and my family will be warm. I know everyone says buy your whole winters supply in the summer but like Hearthtools doesn't have the money or the storage nor do I for much more than a pallet at time. Yeah I figure I'm 26, forgoing a bad accident or injury I can probably cut and split for another 30+ years easy. So what stove should I buy? J/K

 

[begreen]

ML, check out WOW Pellet's Blazers. They are made closest to you and may have the lowest transportation costs. The have a dealer locater on their website. However, it's too early for the big box stores to start stocking. They often don't start until about September.

http://www.wowpellets.com/p_pellets.shtml

 

[begreen]

Another good source in Western WA is Del's Farm Supply. They often have the best local prices, though they may not have stock until Sept. or early October. If there's a store near you it's worth checking with them.
http://www.delsfarmsupply.com/stores.htm

 

[Metal]

Think this will affect prices?

"NYK Global Bulk Corp. of Tokyo has signed a long-term contract with Kansai Electric Power Co. Inc. (KEPCO) to transport wood pellets from Canada to Japan beginning in 2008.

Some 60,000 tons of wood pellets will be shipped annually for five years from Prince Rupert in the Canadian province of British Columbia to Maizuru in Japan's Kyoto prefecture, according to the companies.

NYK Global Bulk Corp. expects seven or eight roundtrips between Japan and Canada each year to transport the 60,000 DWT cargo volume needed for KEPCO to achieve its target. The multiyear contract is the first of its kind in Japan."

From Alternative Energy Retailer

 

[begreen]

If not prices, probably will affect supply. This is just one contract and a possible sign of things to come.

Gives one a sense of the size of the logging operations up there. That's a lot of sawdust.

 

[bcnu]

Used a pellet stove for the past 6 years. The Bear Mtn/Goldenfire mill was about 30 miles away. Think my first years early summer purchase was close to $140 ton and the final year was $170. Didn't use the stove last year. Moved and have a new woodstove, access to free or inexpensive wood, and time. Pellets were the right choice at the time but not sure what I would do now.

 

[littlesmokey]

If not prices, probably will affect supply. This is just one contract and a possible sign of things to come.

Gives one a sense of the size of the logging operations up there. That's a lot of sawdust.

Seems weird to me. These are both Asian companies, does NYK Global bulk produce pellets? This may be an interesting arrangement to follow. If they don't make them, then they will have to contract to buy them. Under current conditions they will be competing with an established buying market, or will have to find/establish a new supplier. I don't think this will affect prices or supply this year, but may affect things in the future.

 

[Kenny1]

60 000 tons does not sound like that much.

What does North America currently produce, like 600 - 700 thousand tons?

So production would have to increase another 10% over the next year to cover than one contract.

Or am I missing something?

 

[Gooserider]

60 000 tons does not sound like that much.

What does North America currently produce, like 600 - 700 thousand tons?

So production would have to increase another 10% over the next year to cover than one contract.

Or am I missing something?

You're missing something... Maybe you need to tighten the bolts on your avatar???

The supply is not infinitely flexible, currently it is probably safe to assume that the plants are producing at or near capacity since the market is clearing (IE they are selling everything they make, at current pricing levels) From the discussion I've been hearing here, it sounds like production is also starting to run into a shortage of sawdust as raw material, which will further restrain production growth. (We may also see a downturn in sawdust production given the reported down turn in housing construction...)

Austrian economic theory says that prices will tend towards the "market clearing" price - which is the average price at which 100% of the available supply will sell, but where there will be no demand for additional units at that price. If the market clearing price goes above the marginal cost (production, distribution and reasonable profit costs) then that is taken to be a signal for increased production, but the increased production usually lags the demand signal considerably (it takes time to ramp up...) NB, the market clearing price does not reflect in any way the number of people that "want" the commodity, only the number that are actually willing to BUY the commodity at that price.

If the supply is greater than the demand at that price, the unsold units will accumulate, and the price will drop to "clear" them out of the market. If the demand is greater than the supply, then you will have shortages, and either the original sellers will raise prices, or at least some of those who were able to get them at the "too low" price will resell at a profit - either way the "street price" will rise until demand = supply. This works because as the price of a commodity goes up, some customers will stop buying it, or at least buy less of it, until the available supply matches the demand at the new price.

Since the pellet market is basically clearing itself at present supply and demand levels, and there are definite constraints on how fast increased production can be ramped up, if you have a spike in demand caused by a contract like this, then you're either going to have a supply crunch of shortages or the price will increase until enough marginal burners have decided that other heat sources cost less and stop purchasing because of the new higher price...

Assuming the cost to bring it on line isn't excessive, and there is enough sawdust supply, the increased price will probably lure some additional producers to enter the market, and if all else stays the same, the increased supply will drive the clearing price back down, but that is going to take a year or two...

Gooserider

 

[begreen]

Markets are developing for alternative fuels outside of our country. As these markets develop, the supply will go to the highest bidder. The yen and the euro are on the rise while the dollar continues to fall. If the dollar continues to decline, we may not be able to afford Canadian wood products, fuel and other resources. Think about it. We've gone from $1.50 C = $1.00 US a couple years ago, to $1.05 C = $1.00 US today. That is a non-trivial drop in US buying power of Canadian products.

 

[Kenny1]

Goose - I think maybe these bolts are already too tight!

Thanks for the explanation (economics is not something I understand).

BeGreen also makes points with other contries and their requirements for bio-fuels, and the value of the US $.

I understand that there is a slow down in the lumber industry (and local to me in the pulp/paper industry :down: ).

What do you think the effect of the pine beetle will have?

The Working Forest posted this:


Posted Tuesday, July 03, 2007

Pine beetle to flood Alberta lumber market
By the Edmonton Journal

Alberta's forest industries are embarking on a "Build-With-Wood" campaign to raise public awareness that the market is about to be flooded with pine-beetle killed lumber and other products.
"The mountain pine beetle is contributing to what we call a crisis in the forest industry," says Ken Glover, executive director of Alberta Wood Works, the provincial arm of a national consortium comprised of forest companies, non-profit industry groups and researchers.

The onslaught of the beetle, which has killed 11 million hectares of trees so far, mostly in B.C., will result in a lot more wood products hitting the markets over the next several years.

Like fire-killed wood, beetle wood needs to be salvage and harvested quickly before it deteriorates. The provincial government has approved steps for industry to accelerate their annual allowable cuts.

But with depressed commodity markets and a slowdown in U.S. house building, the surge of beetle wood comes at the least desirable time.

Alberta Wood Works has written letters to Premier Ed Stelmach, every level of government, post-secondary institutions and the construction industry to urge those planning non-residential capital projects to use more wood in construction and finishing.

Glover says the forest industry hopes to build the same kind of awareness with the public as did the "eat beef" campaign of a few years ago when BSE closed many markets to Alberta cattle.






That same web site had an artical in Jan/07 stating that the BC pellet industry was ramping up to quadruple its output of wood pellets in the next 5 years.




Posted Tuesday, January 23, 2007

B.C.’s wood pellet bonanza
By Financial Post January 23, 2007

British Columbia plans to quadruple its output of wood pellets in the next half-decade as companies move to transform its beetle-ravaged forests into energy in a province one analyst describes as “the Saudi Arabia of biomass.”

The province’s leading pellet manufacturer has already doubled its production in the past two years, and late this March Swedish pellet producer TallOil plans to break ground on its first Canadian plant, a $30 million operation on an aboriginal reserve near Vanderhoof, B.C. It has plans for four more in the province in coming years.


Serious questions remain about the profitability of crushing dead timber into fuel for European power plants and hot-water boilers, although it received a shot in the arm with Ottawa’s pledge on Friday of $1.48-billion for renewable energy, money that pellet-makers should be eligible to access.


Tall Oil is already finalizing engineering work and aboriginal agreements toward its first plant, and has drafted plans for four more in coming years. When completed, each will produce 500,000 tonnes of pellets annually, mostly for export to Europe, and be the province’s first facility with the ability to transform whole dead trees into pellets.





I snipped off the rest of it (too long).

So, I guess this equaltes to

1 - we have the potential to generate a lotta pellets BUT

2 - the big question will be the price of the final product


And #2 will have a lot of factors, including the home building market, gov subisties, stumpage fees (or reduction of) for beetle infested trees, etc. The introduction of bio-fueled electric power plants in BC will also factor in. I'm sure that I'm missing a few other factors!


Or am I making this too complex?

 

[webbie]

Simple laws of economics may be broken in this chain because the markets and producers are regional. Although they do have a market for their products overseas, that has at least two problems:

1. Time - a few months from production to when the pellets can be sold in Europe or Japan
2. Value of the US dollar - it is a record low now, which is good for exports - if it gets strong, then the importers in Europe may think twice.

On top of this, there is the weather in the USA, as well as the prices for alternative (other) fuels. We have seen very clearly by posts on this board that pellet use depends very heavily on these two factors. So pellet prices may rise to what the early buy people will pay, but fall like a rock when a certain amount backs up in the production chain.

So although Goose may be correct in his broad assumptions, when it comes to what you or I can buy a ton for...and whether we buy it at all, that is hard to predict. I would not want to speculate (financially) in this market!

 

[Gooserider]

Simple laws of economics may be broken in this chain because the markets and producers are regional. Although they do have a market for their products overseas, that has at least two problems:

1. Time - a few months from production to when the pellets can be sold in Europe or Japan
2. Value of the US dollar - it is a record low now, which is good for exports - if it gets strong, then the importers in Europe may think twice.

On top of this, there is the weather in the USA, as well as the prices for alternative (other) fuels. We have seen very clearly by posts on this board that pellet use depends very heavily on these two factors. So pellet prices may rise to what the early buy people will pay, but fall like a rock when a certain amount backs up in the production chain.

So although Goose may be correct in his broad assumptions, when it comes to what you or I can buy a ton for...and whether we buy it at all, that is hard to predict. I would not want to speculate (financially) in this market!

The laws of economics aren't EVER broken, however the factors that Web mentions are real and will play into the situation.

It IS a complex problem, and as a result while the basic equation that describes a market clearing price, and why that is the price that is always approached, is simple, it is NOT a simple thing to solve as a correct solution would require perfect information about all the factors that impact supply and demand, including future factors that are not reliably predictable such as weather and politicians. It also includes pricing of other energy sources since comparative advantage factors into the demand side.

The largest part of sucessful economic planning is having access to information about as many of the factors as possible. Since it isn't possible to gather perfect information, this is why gov't run central planning consistently fails. The free market tends to work better because you normally have huge numbers of actors, each working with a different subset of information (and guesses about what they don't know), and coming up with a different solution. Those who predict accurately drive the market and make profits, those that don't guess right make less money and become non-factors in future rounds...

Since I have nowhere near adequate info, I am in no way qualified to make guesses, but based on what you are saying in the articles you mentioned, plus other stuff I've seen around on the board, (I'm not a pellethead, so I don't worry all that much about it) I'd guess that prices will stay more or less stable at their current levels as both demand and production ramp up for the next few years. Then once the finite supply of "beetle wood" runs out, then you may see a real surge in prices, UNLESS alternative forms of biomass come up to replace it. (Note, I would not use this prediction for investment - my Crystal Ball is rather cracked...)

Gooserider

 

[Kenny1]

Goose, your crystal ball may be cracked, but mine is totally FUBAR ;-) .

I see what you are saying about the economic supply of raw material for pellets being finite. I guess that I am just looking at the optimistic view.

Web pointed out the past trends of pellet prices relating to weather and other fuel prices.

And given the rising cost of transit, pellet prices may continue to have wild regional variations.

However, I now confidently know that there are more factors at work that I don't know about.

 

[BrotherBart]

However, I now confidently know that there are more factors at work that I don't know about.

I am proud to award you your PHD in Economics. The satisfaction of insatiable wants and needs with finite resources.

- John Maynard BroBart