Artc my bet is upton has ~10k tons on the ground. All flavor of oakie, something with green on the side of the bag. A big pile of white bags that say ultra premium pellets and have a blue design. In 5 years i have never seen 1/10th the pellets that are sitting there now. The mountain of pellets is just growing and growing all outdoors. Id love to know what is there. I know they do oakies and cleanfires. The amount of pellets there right now is nuts. They usually seem like an on demand supplier. Now they seem like they have a years quantity sitting around already.
I was one cat that claimed a 2 bill floor. A friend of mine that drives for a big material supplier here told me last Friday that at least one pellet mill is cutting material quotas. NOT lowering the price they pay. Cutting the amount supplied. That kinda tells me either they and/or the retailers are oversupplied and even if they cut the price on raw material it will not at this time of year boost sales and that they are nearing production costs. As hard as material has been to acquire for the last 10 years no company worth their salt is going to shut off/limit quotas of a reliable supplier UNLESS they cant move end product. Also,,,,,, no one,,,,,,,,, not even the weather man could have told us last fall that most of the North East would see 40's-50's much of February . Add in $2 diesel ,$1.50 HHO and close to free NG = catch 22.
I know little about the cost inputs of pellets .... BUT There is one scenario that might drive pellet pricing lower, even at or below cost of production. It can be summed in two words Predatory Pricing. I have seen it in several industries that had a lot of smallish local production. The bigger players drive the less capitalized players to their knees and then gobble them up at fire sales. It usually happens in maturing industries and most often during times similar to what will happen in the pellet industry if oil remains low for another season or two.
The Corp I formerly worked for engaged in this practice. It was how they acquired our smallish local operation. They entered the market at below inputs and basically forced ownership to sell. In the following 12 -15 years I was employed by them they acquired at least a dozen others the same way. The Ivory Tower always claimed they were simply expanding territory and the fallout was an unintended consequence. It wasn't. It was part of an overall expansion strategy that was doable because of scale, being a listed corp, and having good access to capital markets. It was sometimes heartwrenching to observe and was an important part of my decision to take an early retirement instead of a transfer.
Again... a lot depends on location. In November, our NG rate doubles, until April..... Yes, it is not ridiculous, but it's far from free. My NG bill is ~$100, and that is mostly for hot water, and using the furnace very very little on the real cold snaps. Summer it's around 35-40. Dan
i don't think they'll need to be terribly aggressive. the market conditions have already done that for them. there could be a shark in the water, but the newer mills may not be able to withstand 2016-2017, where we'll see lower production to empty the pipeline, from the mill to the consumer hoarders and everywhere in between. many mills are shut down now but still need sales, management, and distribution people to move the product on the floor, so their overhead continues. I feel for them. They have laid off workers and slowed or stopped raw material coming in, and made other hard decisions. no doubt some companies are waiting to pounce, but that's not a bad thing for us, necessarily. i for one would like to see things get back to an even keel quickly.
energy companies , big ones, usually hire long range meteorology outfits for a forecast. wsi, part of the weather channel, weatherbell are a couple. might be in there best interest to employee such people if they are not already doing so. seems like it might help even out their production schedules. got to have some deeeeeep pockets when your really selling only 6-8 months/ year. add the unexpected oil slump and it's not the business we thought it was.
Possible. There could be downward movement due to raw material savings. I never would have guessed it would happen ,,, EVER,,,, and am still doubtful. The big players need to show some phat coin to sway raw material markets their way.
It might as well be. I'm hearing $100/month gas bills to heat entire homes. If I had it on my road I couldn't hook up fast enough.
I know very little of this industry specifically but I doubt the capital outline is very different from what I am conversant in (investment in plant versus ROI over time). Supply channels will play a very small roll initially if what I think will happen does (given current energy pricing). Big players (those either traded on the exchange or those closely held with enough scale to enter bond markets) will be able to take advantage of unfavorable inputs, competition from lower energy suppliers to the home heating market and the ROI squeeze on firms without much clout in the capital markets. It will simply be a matter of the big guy withstanding low to no margins (or even losses) in the short term that small guys who must still pay their loans can not. It is also likely that the large producers can, if necessary, mitigate capital pressure by accessing foreign markets. The small fella faces too many hoops that cost money to jump through. I am certainly not claiming enough knowledge to forecast this, BUT, I think my former industry looked a lot like the pellet industry 20 - 25 years ago. A couple (3) large players simply sucked up the smaller guys when a similar set of circumstances was in place. All the money the big guys left on the table early in the game was quickly picked up with lots of interest as they consolidated regional markets.
With no sign of oil prices wavering, It could be a while before things settle down. I haven't heard many mill closing their doors(for good), Mostly buckling down and tightening their belts to ride this it out. But if things don't change shortly it could be some won't be able to weather this. Fingers crossed, We don't lose any mills. But unfortunately it could already be too late for some!!
My last NG bills: February mailed yesterday 130, January 120, December 103. I usually do $55 for Hot water. So the heat part was half the bill. And I burned maybe one ton pellets all winter. Yes, I made out this year
