Members that actually sell pellets

[ZBrooks]

Are there any members that sell pellets as part of their income? Wholesale, area distributor, retail, etc?

 

[BrotherBart]

Why? What is the real question?

 

[ZBrooks]

Why? What is the real question?

I'm interested in the details of the process. Typical pricing, sourcing, contracts, supply chain management, etc.

Is there something wrong with that? I know you booted someone off of here in the past that was trying to pump his product, so I'll take a s.w.a.g. and bet that is what you're trying to avoid.

 

[BrotherBart]

Nothing wrong with it. Just saves time to post the questions.

 

[JustWood]

I'm interested in the details of the process. Typical pricing, sourcing, contracts, supply chain management, etc.

Is there something wrong with that? I know you booted someone off of here in the past that was trying to pump his product, so I'll take a s.w.a.g. and bet that is what you're trying to avoid.

Highly doubt anyone would give up that info. I woodn't.
I tried adding pellet sales to our firewood/coal sales. It was a perfect fit. We were hauling raw material into the plant anyway (could have cheaply back hauled pellets) so they owed us $. Was willing to trade off and pay any balance on pickup and they still didn't want to deal. The profit margin wasn't there anyway so I gave up.
I think the supply distribution network was/is pretty well set up and pellet plants don't want new players pissing off old players.

 

[Pete Zahria]

Pick up the phone and make some calls. That is step one.
After you find that you will pay more for product than the BBS sells them for,
you will just need to send the broker, (you will not deal with the manufacturer),
a check for around 7-8 grand, to get them delivered..
Don't forget to buy your forklift, and truck for deliveries (most people want them delivered)
and have some place to put them, and be quick,
the drivers don't like to hang around more than 20-30 minutes...
Then you can start reeling in that $30 per ton profit... If you want to be competitive.
In other words.... there ain't much money in it! But a lot of work..

Dan

 

[ZBrooks]

Pete - The idea that I have in mind does not involve me being the guy that delivers to the end user. Picking up the phone is probably going to have to be the (only) route that I take since folks aren't willing to even discuss this in generalities. I don't need a copy of a signed contract.

How many mills or distributors does a reseller have to deal with to get the amount that he wants/needs every year? In a typical burning season, are there supply shortages? If so, why? The delivery option to the end user is not typical where I live. I live in Pellet Heaven where the minority of people do not have a truck and trailer to haul their own pellets from the various sources around the valley. There are at least 4 different brands of Douglas Fir pellets that I can buy on any given day within a 30 minute drive from my house. Natural gas is accessible and pretty cheap here, if you live in town. So, it is my belief, that there is more supply than demand in the region.

I'll get to the point - Why haven't mills in the Pacific Northwest figured out how to supply pellets to burners in the Midwest and East? Maybe they have and I'm late to the party to figure out it isn't feasible. Okay, I've still got to ask until I find out the answer. A Canadian company or two is apparently doing it. Is it rail cost? I have contacts in the railroad that I will be asking about this. Could you get the quantities high enough to make it feasible? Is it a matter of local/regional demand is high enough to consume current production capabilities? Why is Home Depot selling Heat'rs (pine) pellets for $229/ton or Lowe's selling Pres-to-logs for $249/ton when you can buy DF's everywhere around here for $250/ton? Cost, even when coming from Arizona (Heat'rs)?

I could go on, but maybe this will be enough for someone to educate me.

 

[hossthehermit]

Seems like yer already waaaaaaaayyyyyyyyyyy too educated to listen to anybody, already ............

 

[Pete Zahria]

How many mills or distributors does a reseller have to deal with to get the amount that he wants/needs every year?

I guess a lot of that depends on your volume, and yes, when there are shortages, like right now,
you have to seek out those that have the product..

I live in Pellet Heaven....
There are at least 4 different brands of Douglas Fir pellets that I can buy on any given day within a 30 minute drive from my house.

that's awesome.. wish it was like that here.

Why haven't mills in the Pacific Northwest figured out how to supply pellets to burners in the Midwest and East?
Maybe they have and I'm late to the party to figure out it isn't feasible.

To get pellets from ~400 miles away, by tractor trailer it runs around a grand.
You are quite a bit further away than that to us.

A Canadian company or two is apparently doing it. Is it rail cost?

From what I understand, and I could be wrong.. rail shipments are bulk. they get handled a lot
before they get bagged on the east coast, and all that handling is not really
friendly to the product.. rail doesn't always go to your door,
they still have to be trucked from bulk, to plant in some cases..
We do get several bagged pellets from Canada.. but eastern Canada,
not the Northwest.

Why is Home Depot selling Heat'rs (pine) pellets for $229/ton or Lowe's selling Pres-to-logs for $249/ton when you can buy DF's everywhere around here for $250/ton?

If we were selling you pellets made here in the east, even junk ones would sell for more than 250 where you are...
Don't forget, there is no such thing as a Lowe's pellet. They don't make them.
They buy from regional baggers, usually closest to their distribution centers locally to get
that pricepoint.
Transportation adds mucho.

Still not exactly sure what you are looking for, but this will be it for me...

Dan

 

[wsar10]

Sounds like your best bet may be to by a portable pellet mill and make pellets out what your hauling into there plant. than figure a way to keep handling costs down, maybe offer bulk purchase only, or purchase some type of containers (55gal drums come to mind, and are always on Craigslist for cheap).

FWIW, there is a "heating fuel" (oil, coal and pellets) distributer next to our property and I've become good friends with folks that own it. HE has told me in the past that he is able to mark up his pellets around 30% he only deals energex pellet and sales them for around $220 a ton, which would put his cost around $175ish a ton. They get roughly 28 ton every two weeks.
So if you can make over $6000 on a CGS of under $5000 thats not bad as a winter supplement to your income. But as said before you NEED a fork lift so factor in that cost, it will be a while before you get a return on your investment. Who knows what insurance would be on this sort of thing..........
All that being said the Energex plant is only 20min from us.

Also I know that if you buy bulk (as a consumer) for home delivery Energex will deliver 2-5 tons for $75 locally, they then charge $180 a ton and will blow them wherever you want them with there vacuum truck.

 

[SwineFlue]

I'll get to the point - Why haven't mills in the Pacific Northwest figured out how to supply pellets to burners in the Midwest and East? Maybe they have and I'm late to the party to figure out it isn't feasible.

It is being done... I believe there are a couple of outfits that get pellets (Okies and Cleanfire Pacific's) by rail from the west coast and bag them in New England for retail sale.

There are also large mills in BC that send all their pellets in bulk to Northern Europe by ship: down the west coast, thru the Panama Canal, and across the Atlantic.

 

[GeHmTS]

I'm interested in the details of the process. Typical pricing, sourcing, contracts, supply chain management, etc.

Is there something wrong with that? I know you booted someone off of here in the past that was trying to pump his product, so I'll take a s.w.a.g. and bet that is what you're trying to avoid.

Have you tried working for one of these companies? That's a great way to answer all of these questions and gain the experience. I don't think you need an MBA, but it may help.

 

[bondo]

I'll get to the point - Why haven't mills in the Pacific Northwest figured out how to supply pellets to burners in the Midwest and East?

I don't know about other areas in the midwest but in WI there are plenty of pellets produced here already. I have 4 within 100 miles of me. I can buy lumberjack at $190 a ton. It would be hard to ship from 100s of miles away to compete with that price.

 

[GeHmTS]

Pellet manufacturing is constrained by region much like fish in the ocean. Lobster in Mass is $4.00/pound while in Calif it's $10.00/lbs. They can ship it here, but can they make $$$ doing it? That's the question. The advantages of BTU between pellet manufacturer doesn't overcome this barrier thus their business is regionally constrained.

 

[mithesaint]

Presto Logs at Lowes for $249? Ouch. Sucks to be those people. I bought multiple tons of Somersets and AWF at Lowes this year for between $175-180/ton. The Douglas Fir pellets may be better, but good luck getting them here for close to that price.

 

[jtakeman]

Pellet manufacturing is constrained by region much like fish in the ocean. Lobster in Mass is $4.00/pound while in Calif it's $10.00/lbs. They can ship it here, but can they make $$$ doing it? That's the question. The advantages of BTU between pellet manufacturer doesn't overcome this barrier thus their business is regionally constrained.

Its not just the shipping/logistics. Point to point usually involves a middle man and/or so called wholesaler or 2. each has to make something so there is a markup once landed.

OP, Call some of the mills that don't have product in your area. Many may sell them direct if there isn't a wholesaler in your region. But I'll bet your landed cost plus the mark up you'll need to recoup will make them equal to whats available in your area. You'll also need to invest in something to unload the truck and be prepared to take shipment of a full loaded trailer(22 tons worth). And you'll also need to store them until you can resale. Lots of others things too, Just touched this topic really.

Selling pellets could be fun, But you'll need to make some connections and invest in numerous items. Not to mention the time and money involved. Also if you clients you reselling to don't have means to transport. You'll need a truck and lift to deliver them. More time on your part.


Good luck and keep us posted!