Blazer (West Oregon Wood) closed their doors this week

The frustrating part for me is it took me over two years to figure out where all you guys went......

 

Glad that you found us

 

A higher price is not gouging. The pricing is by agreement between the buyer and seller, and each has his own reasons for his choices.

 

I agree, but its all in the viewpoint.....I feel I am being gouged in taxes, say, for the schools, but if youre a teacher, or work in the school, you likely dont feel I am paying enough....

 

Often times a word changes true meaning after a while..
I think the word gouging is mostly considered to mean when there is a shortage
of something, and people sell what they have for a highly inflated price, that is gouging.
Like selling flashlight batteries for $5 after a disaster.
But over the years, words are used more often, and many times soften the true meaning.
I hear people using the word gouging when overpricing would really be more accurate.
But certainly we understand what they mean...
Just a matter of how strict you want to be on word selection.

 

pretty good summation, really.....howza bout this:

gouging might be where a certain drug is priced to be ridiculously high (versus cost), and its the only drug of that type on the market.....say, a cancer drug.....I know, I know, costs of development, etc, but when an items is solely available for a sole purpose, the consumer HAS to have it, and is not able to buy from another source....

 

Pretty much what I was getting at.. that is actually a shortage, in a sense... because no one else has it,
and it may save your life.
As a really good example, I know personally of a case, where someone was getting treatments,
and each treatment, every three weeks, was $38,000.
I can't imagine how anything, in a vile half the size of a thimble, can cost that much with good conscience.
But I know... it does.


Dan

 

That would be a good example of why, in modern society (where people live to a riper old age and society shares or shoulders the cost of such a drug), a form of modified capitalism is desirable.

There should be pricing transparency that offers a window to the cost factors involved. Otherwise not only will individuals be busted but society will follow. Unhindered pricing in a monopolistic situation like the one described can not be allowed because without public money whether through research subsidy, or direct purchase of product the described item will likely not be cost viable.

My love takes a med that costs (retail) 3245 dollars monthly, (no decimal point in that number). However the actual transaction costs us 25 and the insurance checkbook pays another 566. So the drug can be sold profitably at 600 bucks. An orderly and stable society requires some lines be drawn.

 

Course pellets will never be a monopoly so we do not need concern ourselves with real price gouging.

 

A buyer and seller do have their reasons and I guess you can call it capitalism but there are vendors who "take advantage" of a supply situation, so what we're really saying is Tomato or Tomahto. Same difference.

 

Actually, we are not saying the same thing, but I'll accept your opinion and leave it at that.

 

X 2 as they say . The Blazer plant closing might work out for me , I've been pushing Olympus pellets to the stove shop I buy from .

 

I think of beer as liquid bread .

 

They have worked out great for us........


Dan

 

Most years it costs me about 40% less to heat my house with pellets rather than NG. But, when on NG, the house is chilly. With pellets we keep the living room 74F or better... nothing better than putting your feet up in front of the stove. I'll be starting year eleven on pellets in 2016.

 

Kinda the same with me......hard to add much to what Krooser said.

 

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Location, location, location, is real estate’s greatest determining factor in value, and if that real estate is a pellet plant, it also determines the product it produces. A series of forested mountain ranges-the Sierra Nevada, the Rockies and the temperate rainforests of the Pacific Northwest-span the Western United States. Many of these and other forested lands in the region are publically owned. The opposite is true for the other half of the country. Privately owned land occupies the Eastern seaboard, the largely forested highlands in the Northeast, including the Piedmont and the Appalachian Mountains, ranging down to the Southeastern coniferous forests that occupy the Gulf coastal plain to the south. Land ownership and forest type are two components that play into what sets pellet production and distribution in the West apart from that which occurs in the East.

Successful producers across the country have learned how to sustainably source the fiber their location provides and, in turn, tap the surrounding markets to distribute the pellets they produce. The markets currently gaining the most momentum are those accessed in the Southeast and Northeast. For example, in April, Portucel Sporcel Group broke ground on a pellet plant in South Carolina, and Northeast Wood Products is retrofitting its third pellet manufacturing plant in Tennessee. Another big player coming onboard in the South is Drax Biomass. The company recently spent 15 months building port infrastructure to handle and ship pellets to Europe from the company’s two 450,000-metric-ton-per-year plants: Amite BioEnergy in Mississippi and Morehouse BioEnergy in Louisiana.

While many of these plants gear up for the expanding market in Europe, further up the East Coast, spikes in demand and supply disruptions have created periods of shortages. On the other hand, an oversupply is occurring in the West, with mild weather and competing inexpensive natural gas. Some Western producers have even funneled excess pellets to the Northeast when requested and customers willing to pay a higher premium for shipping.

As for new Western plants, Centennial Renewable Energy announced plans to build a 160,000-metric-ton wood pellet plant in northern Idaho. Other than this announcement, Western producers agree new production capacity is not likely with an oversupply on the domestic side, and a lack of lucrative export market opportunities. However, as in most energy markets, the volatility makes the future unclear. As the East Coast has had success in Europe, the West may hold promise with their neighbors across the pond. Three producers, from locations in the West, share their decades of experience running successful pellet operations to provide a glimpse at what makes the region's industry tick.

A Southwest Example
Rob Davis, president of Forest Energy Corp. with the help of Gary Moore, director of operations, and 33 employees, runs a 60,000-ton-per-year plant in Show Low, Arizona, serving primarily residential customers in the surrounding Southwestern region. Whereas most Western producers buy sawmill byproduct for their feedstock, Davis’ mill obtains its feedstock differently. “We’re a little unique in the Southwest,” Davis says. “We bring a lot of our wood directly from the forest to the plant—small diameter trees that need to be removed for forest restoration and fire hazard mitigation.”

FEC was the first mill to take material directly out of the forest and make pellets from it in the late ‘90s due to the lack of sawmill operations in the area. Even today, not many producers in the country do, because historically it’s been more economical to purchase byproduct from a sawmill or similar operation when available. Over the past decade, the plant’s feedstock had been guaranteed through the White Mountain Stewardship Project, a 10-year stewardship contract that ended in August. Davis is a founding partner of Future Forest LLC, the prime contractor for the project, which had the aim to thin 150,000 acres of forest to protect communities from wildfire and stimulate the wood industry. Although this helped Davis guarantee feedstock for the plant, stewardship contracts are not common in the West, and the high volume of public land ownership makes a huge difference when obtaining feedstock. “We’re relying on forest management plans by the BLM (Bureau of Land Management) or the U.S. Forest Service to be consistent and reliable so we can have some idea of what is going to happen in the future,” Davis says. “Whereas in the East, you would probably buy a lot more from private land owners, it’s harder to obtain longer term assurances on public lands.”

Although FEC has been able to sustainably source feedstock to churn out pellets and restore forestland, growing the market for pellets has been a challenge in the Southwest. Davis says, in general, the market is spread out much more in the West than in the East. High consumption areas, paired with the region’s population densities, are vastly distributed. FEC can only serve customers located within an economical transportation radius from the plant to make commerce work.

Another impact on market growth is competing heating fuels. “In the West, we have pockets of propane, but we also have, in the past several years, had very inexpensive natural gas, which has made it difficult for the Western markets to grow,” Davis says. “If you look at New England, they’ve had pretty high-priced fuel oil, which has caused more stove sales because it’s very competitive.”

FEC primarily uses ponderosa pine, with a small amount of the Douglas fir species to make its Heat’rs, TerrAmigo and Green Tree product lines. Within the past year, the pellets are now qualified under the Pellet Fuels Institute standards program. When it comes to hardwood species versus softwood, Davis says they don’t see it having a significant impact on the marketplace. He adds that for the most part pellets consumed in a region are produced there. “We shipped more to New England this year because they had a short-term demand and we had some extra product, but that’s not typical,” Davis says.

FEC went into business in 1992, and has experienced consistent, gradual market growth since. Ultimately though, “I don’t see a huge change in the market, or demand for pellets in the West unless outside influences create an impact,” Davis says.

Producing Coast To Coast
Ken Tucker, CEO of Lignetics Inc., agrees with Davis’ outlook. “I think the West is going to be pretty flat and the growth is going to be in the East,” he says.

Lignetics has plants on both sides of the country. The company’s flagship plant, built in 1979, is located in Sandpoint, Idaho. Its East Coast plants are located in Linn, West Virginia, and Kenbridge, Virginia. This February, Lignetics merged with Western pellet producer Bear Mountain Forest Products, adding two facilities in Oregon to the mix, one in Brownsville and the other in Cascade Locks. “We wanted to expand our footprint in the West,” Tucker says. “We wanted to expand our shipping corridors; freight has become a big part of our business lately. There is only so far you can truck our product and still be competitive.”

Lignetics is also in the midst of some expansion projects and upgrades. “At our Cascade Locks plant in Oregon we’re putting in a complete new dryer line, upgrading the pellet equipment and automating the bagging operation,” Tucker says. “We’re upgrading our Virginia facility right now to include additional production capability, and we have just finished an upgrade in our West Virginia plant allowing us to process chips more efficiently than we were before.”

The recent merger and upgrades have increased Lignetics capacity. Its facility in Idaho is designed to produce about 80,000 tons per year with about 5,000 of the tonnage going into log production. The recent Cascade Locks acquisition has the capability now to produce between 30,000 and 40,000 tons of pellets per year, but will soon be raised to 60,000 or more. The company’s Virginia plant will also be ramped up from its current operating capacity of 65,000 tons to 75,000 or more per year. Finally, both the Brownsville plant and the West Virginia facility are permitted at 125,000 tons per year.

Lignetics produces pellets qualified under the PFI standards program at its Idaho plant from premium quality Western conifer sawdust, and has changed the product’s distribution pattern over the years. “We started out supplying 100 percent of our production as bulk pellets as a replacement for industrial and commercial users to displace coal,” Tucker says. “The first pellet stoves became available in 1984, and the Lignetics Idaho plant was the first plant in the U.S. to bag fuel for residential use. We have gradually gone from 100 percent bulk to right now we’re at about 2 percent bulk.”

Now, although almost exclusively residential, Tucker sees tentative potential to export from the Cascade Locks plant located on the Columbia River. “At some point we’d like to be able to think we can export to Asia, but we’re frankly not holding our breath on that happening anytime soon,” Tucker says. “We’re certainly in a good position to do that on the river, which leads us right out to the Pacific Ocean.”

Overall domestically, Eastern and Western producers have access to a similar, diverse retail base. “Hearth product dealers are the people who really brought us to the dance 25 years ago,” Tucker says.

He adds that it’s a mix of the independent dealers who sell hearth products, hardware chains, big box retailers and farm supply stores amongst others. While the markets are similar across the country, pricing varies slightly. “One of the things that keeps the Western pricing down is, quite honestly, there is more supply of pellets in the West than there is demand, which is just the opposite in the East,” he says.

Due to the oversupply, Tucker doesn’t see a lot of expansion opportunity in the West, especially in the domestic market. He believes, “Before you are going to see too much growth it will have to come from offshore opportunities.”

Exploring Any, All Markets
Chris Sharron, CEO of West Oregon Wood Products, echoes Davis’ and Tucker’s thoughts on the status of the current market. “We see pellet plants not running to capacity out here and/or trying to find some other markets,” Sharron says. “The pie stays the same size, yet the slices are getting smaller and smaller.”

WOWP creates pellets predominantly from Douglas fir at its two plants in Oregon; a 30,000-ton-per-year facility in Banks and a 50,000-ton-per-year facility in Columbia City. Like Davis, WOWP has shipped some pellets to the Northeast at a higher freight cost. Sharron attributes their success in selling across the country to the customer base they’ve built who prefer a Douglas fir pellet. “We hope to hang on to at least some of that market looking for a super high-quality pellet,” he says.

Besides the Northeast, Sharron says they continue to look at any and every market. For now, the domestic, residential West Coast is the most suitable with the highest return. WOWP has also sold its bagged fuel into the residential market in Italy. However, over the past few months with the return of the dollar, the increased tax on pellets in Italy, along with port issues, and mild heating seasons in Europe that export business is no longer there. Recently, Sharron has also taken his business to Asia. “We’ve been getting excited because at least we’re on the right beach to service that market,” he says. “We shipped some pretty good tonnage into Asia in 2014, they don’t have a very big thermal market as of yet, so a majority of the pellets are being used to make electricity.”

One of the advantages of shipping to this market was that it helped keep the two Oregon plants running during the spring and summer offseason. Now, with oil prices down and the strength of the dollar back, Sharron says they are debating whether to continue with that business as well. There has been some talk about aggregating pellets together from other plants to get volume up, but the market potential in Asia remains uncertain.

As most Western producers, WOWP uses sawmill residuals as its feedstock. Sharron says in the Pacific Northwest there is a lot of biomass to be used for pellet production, but due to the terrain and often wet conditions it is expensive to harvest the material. “Unlike the Southeast U.S. where whole logs are being harvested in more of a plantation type scenario—flatter ground, large plots—that model just doesn’t work out here in the Pacific Northwest,” he says.

Sharron adds that with the market for the finished product and the pricing where it’s at in the West, it just doesn’t pencil out for his business to use anything but sawmill residuals. Currently, market pricing in the West for residential pellets freight on board (FOB) the mill is less than in the East. West Oregon is in the $150 to $160 per ton FOB mill range. Whereas in the Northeast, the plants there are in the upper 100s, some reaching over $200 per ton FOB the plant. “That’s why you see some people chipping whole logs in the East to use for pellet production,” Sharron says.

Running a successful Western pellet operation parallels in almost all aspects among these three producers. The tale is told of little market growth due in part to the West’s ample natural gas infrastructure, consecutive mild heating seasons and widely distributed markets and population density. These realities differ from the other half of the country, with the Northeast’s intermittently high fuel oil prices spiking pellet stove and boiler sales. The increasing demand for pellets in Europe gives way to increased pellet production along the Eastern seaboard. While, these three Western producers see potential opportunity on their opposing side of the beach, little can be said on how quickly the demand will come, and whether it might rival the growing volumes in Europe. Also, the current oversupply deters future plant construction, and with the exception of Centennial Renewable Energy, little talk of new capacity has occurred.

Sharron says you need all three legs of the stool when assessing whether to build: source of fiber, know-how to construct and operate a plant and a market for the product. “All three legs are an issue right now,” he says. “Maybe not so much with the actual manufacturing, but the biggest issues are raw material supply and probably the biggest, lack of market, at least at the right price.”

A few tough years following the recession slowed down Western sawmills, which drove the price up for the fiber, and pellet prices haven’t followed. Even so, producers in the West have learned how to get creative to find market opportunity, and the variability in the marketplace could soon change the current landscape. In the meantime, with an occupation sometimes based on predicting the unpredictable, producers focus on the present. “I’m dealing with the day-to-day, keeping things running and keeping things going until hopefully some things do change in the future, which helps make things a little bit brighter,” Sharron says. “We celebrated our 30-year anniversary this May, and we're looking forward to the next 30.”

 

that was written by Katie Fletcher 5/21/15.......sorry i cut it off when i pasted it.

 

Thanks for the post. This confirms how volatile the pellet market is. A year after celebrating 30 years, they close their doors for good. It's a shame.