Most of the drop youll see in pricing will be fuel surcharges . There is still a raw material supply issue ( although I see it maybe stabilizing in 12-18 months. ) and production and transportation costs that are always rising. I'm in the transportation biz and equipment costs are still staggering. Fuel surcharges may drop but base costs are increasing all the time. It will be an interesting few years. IMO its gonna take 2-4 years for some of this to shake out.
Like pelletguy said.. and I agree, the cost to make a pellet and ship it doesn't leave a lot of wiggle room. It cannot be compared to oil/gas. For a small dealer to get into that $250 range for what most here call 'good chit', his price delivered has to come down.. That is not going to happen with the same relationship as fuel. I think what we may see happen, is that some of the places that sold pellets as more of a convenience, like hardware stores and the like, will not do so in the future. If they can't make a just a fair profit, what is the point? I don't see how it would ever again be possible for guys like us to be able to offer a decent product for $199.. We couldn't do it six years ago.. You should never say never.... but I will say it will never happen. And I still think, that the start of next season, the BBS will be right back at that $259 area. And I'll bet they cut down on the inventory.. Could be wrong... but I don't think so... They are willing to take the hit now, to clear stock, and make room for bark mulch etc, but there is no incentive for them at the start of the season. Dan
And you know more than anyone.... fuel is a relative small factor in trucking.. When people see the cost of diesel come down, they automatically think there should be a huge savings... not happnin'... Dan
Hey Dan, it just so happens there is a dealer in NH selling Vanderhoof Platinum Pellets for $248/ton and has been for some time now. That product is widely considered to be good chit, see? Anything is possible.
I placed an order for Blazers today probably have them next week. $250 cash/check they need to empty their rented warehouse(s) space like Dan and others are saying above, I don't believe we'll see large swings downward in prices after this 'adjustment' period ends. so stop by and grab some of these.
I've said it before and I'll say it again. Making pellets is not like big oil. Most pellet mills don't have huge cash reserves and can't afford to operate at a loss very long, if at all. We have an artificially low price set by the BBS to rid themselves of seasonal inventory. The market is in total disarray. I had one of the larger pellet dealers in New England ( who also isn't afraid to stick his neck out and gamble on a "good buy") tell me that you never try and catch a falling knife, you wait till it hits the floor, then you pick it up very carefully! Most people don't know what to do, although I personally think we've gone through the floor, there is not enough out there to convince people. Only a very few people ever hit the bottom of a market and right now I bet there isn't a pellet dealer out there that would give a commitment on next season's business, even if he could sell at $199 per ton. (Which would be well below anyone's production cost.) I don't think there is a mill that would go to that price ( unless it was a "going out of business" sale). When the market overreacts up or down it always corrects itself. Big oil can sustain selling under costs for a long period of time because of their huge financial resources, pellet mills can't. If the price does drop to the 250 range many of the brands you see won't get into the northeast. This will bring production more in line with demand. It will take some time but it will happen. just my 2 cents. I could be right, I could be wrong, but I'm not going to stick my neck out!
There are some things going on in the forest product industry/economy that if they play out like I think they will , should bring raw material costs down and make material more plentiful. We'll see ,but I'm not betting the farm on it. I think we're at the floor and $10/ton savings at the front end (raw material)might get added at the rear end (retailer).
Thing is that the price of pellets has to be less thaN the cost of oil or the market is not really viable in the long haul. The majority of pellet burners are interested in pellets as LESS COSTLY heat not as a hobby. They may burn a bit for ambiance at a premium over oil but not to heat a house. Pellets will for the foreseeable future be driven by the cost of oil and to a lessor extent LP gas. If oil remains significantly cheaper than pellets for more than a couple of seasons the residential pellet market will become a small niche that will not support the small regional makers. An alternative scenario, and perhaps more likely, is that stove makers will market more forgiving stoves that can more easily handle "poor" quality pellet fuel. Option three is that vented oil and kero stoves will make a comeback.
This ,,,, 100%. Production costs on res grade pellets are constant+. With all the cheaper available raw material stock available stove companies would be foolish not to pursue manufacturing of more forgiving stoves pelletwise . Convincing the wife of the looks another matter.
You say $199 is below production cost. I thought I read that Viridis was getting on average $200 a ton for their pellets. It's possible I am mistaken but it was in a press release since they are a public company. Edit: The press release indicated they were selling their pellets for $250 a ton, up from $190 in 2014. So it seems reasonable pellets can be produced for sub $200, especially those that use waste wood from their own business processes.
That's impossible, Doug said he's selling at the same price as last year. lol Aug. 10 2015 I'm selling at the same price as last year as well....but probably like Steve, don't set retail selling prices...that is up to each dealer in their own market....
For the three-month period ended Sept. 30, Viridis recorded revenues of $8.36 million up from $7.6 million in the third quarter of the prior year, an increase of 10 percent. During the quarter, the company sold over 33,000 tons, with an average price of $250 per ton, up from $190 per ton in the comparable period in 2014.
The press release is very misleading. Most manufactures in the forest industry figure their selling price FOB the mill gate. I think the price in the Viridis press release refers to the FOB Upton price. This includes transportation from Western Canada and packaging costs, which are not costs of production. For a dealer to be selling pellets at $199 he would have to be buying them cheaper than that. I'm not sure I made this any clearer. lol
there have been some comments lately that oil is much cheaper to burn now than pellets, and really low numbers that pellets would have to drop to to make it feasible to burn pellets. I don't think i subscribe to that theory. i posted the following last fall... My net oil consumption for heat here in central CT (after removing the hot water portion) averages 650-700 gallons (with auto setback thermostats 68 downstairs, 63 in the bedroom). last year with the pellet stove going and the oil on backup for upstairs at night it was perhaps 50 gallons. 650 gallons at $1.90 a gallon is $1,235. 4 tons of pellets @ $269 is $1,076, but the house is 70 degrees downstairs 24/7. So it's getting close to a wash in terms of cost, but i'd much rather listen to the pellets dropping and the blowers than the oil monster. so, if you simply substitute the now lower cost for oil at the best price i bought it for this year of $1.59, you get a total cost of oil of $1,033.50, down from $1235. but the pellets i bought last year at @269 retail a ton were $1076. By my math, oil is just about dead even with pellets in terms of cost. now i get it that you need to feed the pellet stove every day and clean it regularly, as opposed to simply turning up the dial on the oil burner. but you also pay the oil man to clean the boiler every year for another $150, give or take. and you better be adding some Biocide to the tank or you will get the hated black slime for another $30. but for me, i like the exercise of feeding the stove and being more conscience of the outside temps each day. kinda puts us more in touch with nature, don't you think? So, where is this great savings to burn oil? same price and i'm colder. less work, but i certainly could use the exercise! and no one sits around the oil furnace just my .02
artc All that is correct. I think, however , that you are in the minority. It is of course the old equation. Money for labor or labor for money. Some will take the labor, others the money. When I was younger I always spent the labor. Now - Not so much. I can be sufficiently conscience of outside temps by looking at my weather station. BUT -- I get it. Each of us measures with our own scale.
Isn't this ironic? We started the season debating whether east coast HD stores would sell Blazers this year like they have in the past. Turns out the answer is no, however something even better than that happened; now as we approach the end of the season, we have an independent dealer selling them for even LESS than HD's season prices for middle of the road chit. Just goes to show you anything can happen. Let us know when they come in. I'm going to try to get over there and grab some. Would like to grab some EZB softies as well if you still have any. Is a weekend day ok if arranged ahead of time?
We are in much the same situation with oil vs. pellets here artc, even w/ the lower prices of oil, it's basically a wash cost-wise, and the home is 5-7 degrees warmer vs. oil only this season, due to the warmer temps. we've had. When I did the number comparisons last year, even with the added electricity, it averaged $30-$40 / mo. difference. We love roasting Pellets here. And you're right: our cat isn't sitting around the heat grate waiting for the furnace to kick on, but we have to move him constantly from in front of the pellet stove to fill the hopper.. He's a smart boy. We have used 182 gals. of #2 fuel oil from May 2, 2015 through Feb '16 to-date: that's an average of 18 gals./mo. this season: last year, before install, we would use that amount, in 5 days or less, to keep the home @ 62 - 64 F. Ugh. Pellets Rule. And Beer. ( Really looking forward to drinking some next week, too much traveling until then. )
The northeast has been fertile ground for pellets. Highest prices in the nation. Last year Home Depot got short and shipped Blazer east to help supply demand. At a great loss btw. This year you had a global trading house get into the market. He is licking his wounds while trying to liquidate stock. Trust me, with transportation costs from the west coast no doug fir pellet can be sold for less than 309.00 Feast while you can, but as prices drop so will choices. The disturber that brought in Blazers will be licking his wounds as he goes onto another commodity.
