Don't Count on Pellet Prices Going Down

[BubbRubb]

For certain. I went through 1.5 tons last year and have 2.5 left, but am buying 3 more b/c I have the room to store them and do fear prices increasing substantially in the near future. Fuel costs are going to drive up the pellet price even if sawdust doesn't.

 

[Don B]

I burned 3 tons and am trying to figure out if I want to order/store now versus waiting until July/August. I have to store in a barn and am concerned about pellets absorbing moisture.

 

[BubbRubb]

If you keep them under wraps then there shouldn't be a problem. I camp close to the Energex plant in Mifflintown, PA and they do not store theirs covered. They have been exposed to plenty of weather even before they get to your dealer.

 

[JustWood]

I just got my Spring Sale quote my dealer sends out every year. This year it looks like prices for late-March through April are $189/ton and $207/ton for May. This is within a couple of bucks of last year's prices. It goes up from there peaking at $247 in September for the last month listed. These are for Hamer's Hot Ones that I am really happy with. They burn a lot hotter and cleaner in my P-68 than the Energex I used this year.
Of course, there is a disclaimer in the letter that says "These prices are based upon current freight charges quoted to us from the mill. If these charges change, your pricing will be adjusted accordingly." True to this guy's word, though, he has actually dropped the price when his prices have decreased.

Keep us updated on his prices . Very curious to see how much freight charges add to the per ton price.On a 100 mile haul from supplier to retailer for every $.01 fuel increases pellets should increase approx. $.02 per ton. This does not account for production or labor cost increases just a fuel surcharge.I think supply and demand plays a bigger role in the price increases.

 

[Xena]

I burned 3 tons and am trying to figure
out if I want to order/store now versus waiting until July/August. I have to store
in a barn and am concerned about pellets absorbing moisture.

Don't worry about storage, go ahead and buy them if the price is right.
See this thread if you need more assurance. ---> https://www.hearth.com/talk/threads/16190/

 

[BubbRubb]

I just got my Spring Sale quote my dealer sends out every year. This year it looks like prices for late-March through April are $189/ton and $207/ton for May. This is within a couple of bucks of last year's prices. It goes up from there peaking at $247 in September for the last month listed. These are for Hamer's Hot Ones that I am really happy with. They burn a lot hotter and cleaner in my P-68 than the Energex I used this year.
Of course, there is a disclaimer in the letter that says "These prices are based upon current freight charges quoted to us from the mill. If these charges change, your pricing will be adjusted accordingly." True to this guy's word, though, he has actually dropped the price when his prices have decreased.

Keep us updated on his prices . Very curious to see how much freight charges add to the per ton price.On a 100 mile haul from supplier to retailer for every $.01 fuel increases pellets should increase approx. $.02 per ton. This does not account for production or labor cost increases just a fuel surcharge.I think supply and demand plays a bigger role in the price increases.

These prices do include the current freight charges from the mill. I don't have a breakdown of how much freight is versus the pellets. I don't anticipate them changing much in the next month when I am going to buy mine. However, if diesel keeps continuing to rise I would not expect the September price to stay the same. Also, this is not delivered. He charges $45/$55/$65 for 1-2-3 ton respectively within 20 miles. $2.95/mile no matter how many tons beyond the initial 20 miles.

For those of you in central PA around State College you should check out Center Hardwood. (broken link removed) The guy has his own mill so he doesn't have to pay high prices for sawdust. They have good customer service and you can buy directly from him. Last November when I was buying my pellets he was $30 cheaper per ton than anywhere else. He is currently setting up a distribution network, but if there is no dealer in your area he will sell to you directly. I would have bought from him, but had no economical way to get them back to MD in the quantity I needed. Several people from that area I camp with have highly recommended them.

 

[Shane]

After having burned pellets for alot of seasons now I think that I'll switch out to wood.

 

[Sting]

Your thinking of moving from pellets to chunk wood ??? Tell me more please!

 

[Ken45]

Your thinking of moving from pellets to chunk wood ??? Tell me more please!

Same here. We have only had a pellet stove for exactly a year now and we have not been satisfied with the job it does keeping the house comfortable. Oh, it's fine on 40 or 50 degree days but when it gets colder, we need the wood furnace.

We just bought a PE Summit, no rush to get it installed at this time. Economically, wood only takes effort on my part. Or we could buy it at half the cost of pellets. But even moreso, it puts out better heat for us. We will probably continue to use the pellet stove as a thermostat, especially for when we are gone for the day.

Ken

 

[roninnb]

The mill itself shut down under Georgia Pacific(the old James river)....but the business is doing rather well...providing many more jobs than Georgia Pacific did....

(broken link removed)

(broken link removed to http://www.forestbioproducts.umaine.edu/Red_Shield.php)

Thanks for the links. I wonder if the waste from the process can be processed into pelletized fuel? That would really complete the loop.

 

[MAD44]

What I find interesting is that when I visited my local dealer recently he advised he hadn't sold a single pellet stove the entire season. They also sell and install gas fireplaces. They are a major business in a city of 80,000. I bought my stove two years ago and the demand was huge. They couldn't keep them in stock and had some on a waiting list while they waited for more stoves from the manufacturer. I think now the rising costs of pellets and corn will make pellet/corn stoves another great idea that will fall flat. I'm guessing they'll be less places that continue to make pellets in the future and the current demand will drive prices up even more.

 

[mkmh]

I agree with the theme of the thread. Pellet prices are most likely going to rise steadily over the next several years. However, I am guessing that petroleum prices will rise at an even steeper rate.
I am also assuming that that a time will come where it makes zero economic sense to ship pellets to Europe. Once that happens, I would think that suppliers would look to sell their product as close to the plant as possible. This would (at least temorarily) result in a spike in pellet supply here in the US..which should help stabilize prices.
It is tough to predict what is going to happen, but at least pellets are made from a renewable resource, and there is some hope that they will still be an economical heat source in 20-30 years.

 

[MainePellethead]

At todays oil prices....I could eat up 400 dollars a ton(even though I dont want to!!)...and STILL save 600-700 a season....I'll go through about 2 tons a season.....as opposed to approx. 500 gallons for the season with oil. But....I agree with you mkmh....thats the way I look at it as well. Only time will tell though.

 

[houset]

At todays oil prices....I could eat up 400 dollars a ton(even though I dont want to!!)...and STILL save 600-700 a season....I'll go through about 2 tons a season.....as opposed to approx. 500 gallons for the season with oil. But....I agree with you mkmh....thats the way I look at it as well. Only time will tell though.

Exactly The way I look at it is I want to become less fossil fuel dependent, and in my current situation, i have spent $2700 in Oil since October. So for my situation, this is a no brainer. I got a stove and Piping for 1000 bucks and I really expect that in 2 years it will pay for itself, especially with the amount of oil i use.. I really do believe that as the election moves closer, we will see a dramatic decline in fossil fuel prices. It's the only way republicans will hold onto the white house.

Let's put it this way.. i'd rather give my money to the local sawmill producing the pellets than the Saudi's jacking up oil prices. Do you know that Fuel costs in Saudi Arabia are approx. .91 a gallon?

 

[Shane]

I think that I want the added independance. I'm moving to where there are 3 acres of overcrowded Ponderosa pine. No one can tell me what, when or how to cut it. No one can tell me that I'm limited to only one pallet so that everyone can have some. No one can tell me that the price per bag has gone up x.xx in a week due to "fuel costs" or "lack of raw material". Both of which are likely real issues, but not so with cord wood. The down sides are a 45 degree house when you come home to a fire that's gone out, much more time involved in gathering and prepping fuel not to mention actually starting the fire but it will be worth the trade off in my opinion. Not to mention that it is actually more expensive to burn pellets here in Wyoming now compared to natural gas. And that's without considering annual maintenance costs, gasoline to go retrieve pellets, electricity used by pellet stove etc. While all these costs are nominal is just pushes pellet burning costs that much higher. It's almost even with propane, which is the alternative heating source in the place I'm moving to. I understand burning pellets with the fuel oil prices out east, I'd burn them too. I also like the idea of giving back to a local sawmill rather than a society that stands for much of what's wrong in this world, but I really like the idea of giving back to myself in the form of free heat and good exercise.

 

[houset]

I think that I want the added independance. I'm moving to where there are 3 acres of overcrowded Ponderosa pine. No one can tell me what, when or how to cut it. No one can tell me that I'm limited to only one pallet so that everyone can have some. No one can tell me that the price per bag has gone up x.xx in a week due to "fuel costs" or "lack of raw material". Both of which are likely real issues, but not so with cord wood. The down sides are a 45 degree house when you come home to a fire that's gone out, much more time involved in gathering and prepping fuel not to mention actually starting the fire but it will be worth the trade off in my opinion. Not to mention that it is actually more expensive to burn pellets here in Wyoming now compared to natural gas. And that's without considering annual maintenance costs, gasoline to go retrieve pellets, electricity used by pellet stove etc. While all these costs are nominal is just pushes pellet burning costs that much higher. It's almost even with propane, which is the alternative heating source in the place I'm moving to. I understand burning pellets with the fuel oil prices out east, I'd burn them too. I also like the idea of giving back to a local sawmill rather than a society that stands for much of what's wrong in this world, but I really like the idea of giving back to myself in the form of free heat and good exercise.

If i lived where i had a few acres of trees, there's no doubt that i would being chopping wood. My sister and her husband live on 18 acres of woods in northern PA, and htey have free heat. Of course, he spends about 1 week in the fall chopping and splitting, but to me that is worth it. Unfortunately i live in a town with about 5 trees in my yard I really have two options; Pellets and Coal. And my personal preference is coal especially since we live about 20 minutes from the Reading Anthracite coal company, but the dust associated with teh coal turned my wife off to the idea..

 

[Ken45]

I think that I want the added independance. I'm moving to where there are 3 acres of overcrowded Ponderosa pine

FWIW, the rule of thumb that I have heard is that you can get about 1 cord sustained yield per acre. Starting our overcrowded, you will be able to get more than that of course. Of course it also depends on your locale. Some places with fast growing trees will get more than that, others will get a lot less.

Ken

 

[mbcijim]

Wow Gentlemen (and maybe ladies?).

One of the most intelligient threads I've read on any forum anywhere!

Couple of questions.
1. Does anyone know the net margin of a wood pellet business as a percent?
2. For the larger pellet plants (couple a hundred tons/day & up), are they using some green wood?
3. If they are using green wood, does it need to be dried? If a pellet plant had access to free steam (to dry the wood)), would that constitute a huge competitive advantage?
4. Can waste scrap softwood (say wood molding cut-off) be turned into a wood pellet? How about 2"x4" scrap? What can & can't go into a wood pellet?

 

[JustWood]

1 Don't know but I don't think they are getting rich. Multi million dollar investments.
2 Depends on availability of kiln dried wood which is very limited in most areas.
3 a. Yes . b. I wouldn't say a huge advantage but a plus yes.
4. Any clean, bark free wood can be ground into a product suitable for pellet production. If said molding was varnished or stained it would not be suitable.

 

[webbie]

At todays oil prices....I could eat up 400 dollars a ton(even though I dont want to!!)...and STILL save 600-700 a season.....

I am not denying your experience, but the only fair way to compare fuels is on a BTU to BTU basis.

Pellets at $400 a ton are $2 for 10 pounds.

10 pounds of pellets contains approx 80,000 net BTU, some say 75,000 when adjusted for moisture.

Heating oil at $3.50 a gallon contains about 138,000 BTU. That means oil is somewhat cheaper per BTU, especially when the efficiency and other matters are figured in.

A good way of rough figuring is to move zeros around - roughly, pellets at $250 a ton delivered is the same as $2.50 oil. Again, all figures are rough.

Any way we look at it, I have seen that when and if pellets hit the upper 200's or $300, MANY folks stop using them. While some may continue, it is not enough to keep pellet stove and pellet sales at a decent level. IMHO, the market is built upon having pellets at about $200 - maybe $250 if oil stays really high. But also consider that oil is a RARE fuel nationwide, many use NG, which is quite a bit cheaper in most cases.

 

[mbcijim]

4. Any clean, bark free wood can be ground into a product suitable for pellet production. If said molding was varnished or stained it would not be suitable.

How hard is this to do? Does it take just one piece of machinery?

Does anyone know if any of the MD/NY/PA/NJ pellet plants offer factory tours?

 

[jc8367]

I'm looking to buy a pellet stove but after reading this thread I'm starting to reconsider. What's the situation like in NY, Long Island area.

 

[JustWood]

Depends on how much you want to grind in a given amount of time. I have a wood hog set up near my wood processors for grinding scraps and bark into sawdust. It cost me $4000 used. It can only grind about 2-3 yards per hour and that is really pushing it to the limits. A small tub grinder capable of 50+ yards/hour and a loader to feed it will cost $300,000+ new. It's not a very profitable venture.

 

[mbcijim]

Depends on how much you want to grind in a given amount of time. I have a wood hog set up near my wood processors for grinding scraps and bark into sawdust. It cost me $4000 used. It can only grind about 2-3 yards per hour and that is really pushing it to the limits. A small tub grinder capable of 50+ yards/hour and a loader to feed it will cost $300,000+ new. It's not a very profitable venture.

I am in Eastern Pa and have a slew of unique contacts. I think I have some unique business strategies that may make the process more profitable than most others in the same business:
1. I have access to almost free steam from a very small power plant.
2. I have free access to waste from wood door & window manufacturers about 20 tons or so a day. It is being landfilled currently.
3. I have free access to a lot of timber. I am often involved in large clearing operations where we chip the waste & bury it (100 acres at a time). This is in addition to the land I personally own.
4. Right now I personally own 50 acres that is waiting to be cleared & grubbed. That is probably an average year for me.

I have no idea on the other costs of the pellet business, but I can't help but think if I have all but free steam, and almost free wood that a pellet business would work. I have started about 10 other businesses, this is kinda what I do for a living.

I appreciate your feedback. I know very little about these businesses. I looked up tub grinders on the net and watched a video or two. They appear to put out more of a mulch than a sawdust. Can tub grinders make sawdust for pellets?

 

[MainePellethead]

At todays oil prices....I could eat up 400 dollars a ton(even though I dont want to!!)...and STILL save 600-700 a season.....

I am not denying your experience, but the only fair way to compare fuels is on a BTU to BTU basis.

Pellets at $400 a ton are $2 for 10 pounds.

10 pounds of pellets contains approx 80,000 net BTU, some say 75,000 when adjusted for moisture.

Heating oil at $3.50 a gallon contains about 138,000 BTU. That means oil is somewhat cheaper per BTU, especially when the efficiency and other matters are figured in.

A good way of rough figuring is to move zeros around - roughly, pellets at $250 a ton delivered is the same as $2.50 oil. Again, all figures are rough.

Any way we look at it, I have seen that when and if pellets hit the upper 200's or $300, MANY folks stop using them. While some may continue, it is not enough to keep pellet stove and pellet sales at a decent level. IMHO, the market is built upon having pellets at about $200 - maybe $250 if oil stays really high. But also consider that oil is a RARE fuel nationwide, many use NG, which is quite a bit cheaper in most cases.

I know what your saying about the BTU....but I know how many BTU's it takes to keep US warm....some people run their stoves hotter etc etc...we are very frugal but warm. My house is tight...and 2 tons a season...."maybe" 2 1/4 tons will heat us nicely all winter. You cant get that kind of savings with oil. If pellets skyrocket....I cant stop that....will add a small woodstove in basement Then I'll have the choice of 3 various heat sources