Its not just the Maine mills struggling, all of the north eastern mills are hurting. The ripples have gone all the way down to the southern mills and out to the western mills as well. Many mills are looking at saggy sales and loads(more like mountains) of goods stuck on landings and stuck in retail stores. I think the list of struggling mills could be very long!!
While this may be good for short term pricing deals, in the long run this isn't good at all and we could be screwed.
Totally agree with you Sub , what goes around comes around , if several mills stop producing pellets ,or start shipping over seas and dino juice goes up , we the pellet heads have less options on product and prices . That's just my 2 cents
Not could be,it is long. Many of the mills will take shutdowns and may never return. ( My bet is a number won't return)The northeast is by far the largest market in the U.S. With a few exceptions the mills farthest away simply will not be able to ship in there economically. Most of the pigs on here recognize $199 a ton is amazing. But prices can't stay there. There is no mill I know of that can sell a retailer for him to sell at $199 per ton. The vast majority of pellet users don't have the space or the foresight to take advantage of the pricing. many are week to week buyers. There are a lot of stoves installed in the northeast, so there will be a pellet business. There is a lot of production out of the market now with a lot more to come. When the current glut is dealt with the price will settle and we can again have some predictability in the market. In the short term, it is ugly for producers and retailers.
Yeah who knows. The only thing I do know is pellet pricing needs to be cheaper than oil to be a viable industry for home heating. Otherwise folks will turn to whatever else. Unlike what a certain someone said, there is no market for more utopian reasons. There is a scenario I can imagine where we all win, well except the more poorly run manufacturers. Let's say there is consolidation where the deeper pocketed, more well run business scoop up strategic locations. Perhaps this can give them production advantages that allows them to produce even cheaper than they could otherwise, now being able to more closely compete with oil.
There are so many factors that come into play. Over production, the oil price drop etc. I'd like to think that if the stores hadnt been so greedy starting out this fall that there wouldnt be such an overstock of pellets. Many of us can choose oil or pellets etc but we also mostly prefer pellets. $199 is a great deal. When i started burning I paid $169 a ton for years. If these mills can make and sell pellets for $169 before the oil boom then they still can. $269 for bbs pellets was just insane and i'm actually glad they had a reality check this year otherwise next year it would have been 299 a ton or 309. I do worry however that if too many mills go out of business, that will inflate the price and or make these hard to find. I'm set for '16, '17 and '18. will watch and observe, as i now have some time to adapt to the heating changes as the scenario unfolds.
Ya'll assume that they will come back trying to compete with cheap oil. When, if a lot of the smaller producers drop out for good, they could change their strategy to compete with electric and those of us with high-priced propane and/or old, inefficient burners (not a large percentage, but perhaps enough). Also horse bedding pellets seem to be holding their price at 5.50/bag. Push them enough and it will be cheaper to (or more advantageous tax-wise) to change dies for other products. Almost no manufacturer can stay in business just serving one consumer type and this may be the right incentive to change things up. Time will tell . . .
I don't think they can , like you said , " there are so many factors that come into play ." I think we need to separate oil prices from wood fiber prices IMO they don't go hand in hand . Oil is $30 / barrel has the price of 2 x 4's and plywood dropped to the same price levels when oil was that cheap ?? Don't think so ... The cost of doing business always goes up , increased wages , health care, equipment costs .... Not hate'in on any one here but, $199 / ton is a gift grab as many as you can and I know that you did Dr. Faustus I wish I had the area to store that many tons , I would have done the same thing I could be wrong ,but I think that next season prices start at $250 - $275 / ton, IMO
One important factor I dont think you are thinking of is a lot of pellets are made from wood waste from other processes. As long as the economy is good and folks are buying floors, furniture or whatever. The virtually free material will be there. They are the ones I envision competing with oil and other forms of heat. The mills that need to compete for lumber on the open market may be sol.
It's not Free material , the saw mills and flooring companies .. know that they can sell their waste [ saw dust ] to pellet mills , without the dust there is no pellets and with anything else what you're selling is only worth what someone is willing to pay . I could be wrong ,but I think some of the insiders here have stated that mills sign contracts to buy the dust , so that price is fixed for several years . I guess the point I'm saying is that cheap oil don't = cheap pellets . Happy heating with what ever you choose time for another Beer or 6
Much of the pricing talk is with big box purchases. I have never relied on that avenue for my primary source and likely never will. I have dealt with pellet houses who do their homework and offer the best that they can to keep their customers happy-and warm. It costs a little more (maybe $15-20 per ton), but the customer service over the "all pellets are the same" attitude or "Susie 17 year old" at the register is worth it IMHO. I cant call HD or Lowes and say "Hey Dave, Its Geno" and have them know who it is and know a little about me personally and my heating preferences. They wont bring a few extra bags of pellets because they noticed that some of the bags in a pallet "might" be damaged. They wont call me saying that they havent heard from me yet in late June or July and will be in the area on a delivery to save me some delivery charges-and then still give me the same pre buy deal pricing that ended 4 weeks ago-that happened last year when pellets were booming and he didnt have to for business sake. Will this years greed cause a market correction? Probably, but I think that any pellet mill that has superior product and has their chit together will still be around. Unfortunately a new startup or struggling mill may not be around and yes that might be the end of a decent or promising option.
You might be right about the contracts for raw material-I dont know. What I do know is that a lot of products, including pellets, spike in pricing because of "the cost of oil" as one of the primary determining factors. I dont see the reverse correction happening now, and in my mind that is pure BS.
Those that are stuck paying inflated prices for someone else's dust may be in trouble. But what about those that use their own dust, like Somerset, Cubex or PWI to name a few. They would have a nice advantage over others. I guess my main point is pellets may not be directly related to the price of oil but they better fall when oil falls or they will be in big trouble as we are starting to see. I also don't believe pellet prices will sky rocket even if there are only a few manufacturers. Simply because the market will not tolerate the cost.
My biggest concern is that if prices fall to say like 150 a ton during a spring clearance, where am I going to fit a tractor trailer load on my property? I can probably squeeze another 5 tons in the garage if i got really really creative.
I've got plenty of room over here doc. I'll store as many tons as you want for a couple tons for myself
I've read everything above and agree with some of what was said. A lot of mills don't use sawdust anymore in Maine because there isn't enough of a supply and now are chip to pellet mills. There is a strong demand for wood up here and the pellet mills are competing with paper mills, pallet mills, export, etc., so their price of raw material won't drop much. My wife's cousin is a logger and he told me last year that unlike in the past, these days if he logs an acre, every bit of wood on that acre has a value and is salable. It wasn't always like that. If MWP, Corinth, and Geneva (Lignetics) shut down, that's a lot of pellets that have to be made up elsewhere. MWP alone if 110,000 tons per year. Add in the other 2 mills your looking at over 200,000 tons of pellets out of the market. What does that do to pricing and availability?
