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Wood Pellet Supply ‘Spotty’



Monday, December 01, 2014
West Lebanon — Last year’s unusually long winter left some owners of wood pellet stoves scrambling to find enough fuel to stay warm in the spring, and that experience has led to an earlier-than-usual demand for pellets this year.

Now with the heating season here, supplies have been described as tight and spotty, though industry experts are confident that the supply will meet the growing demand.

“In my opinion there is enough production, but people should spread out their purchases,” said Mark Wilson, CEO of New England Wood Pellets, a manufacturer in Jaffrey, N.H. “People should be able to buy product as they need it.”

Still, Wilson and others say supply can be inconsistent because of an increase in sales of pellet stoves to homes as well as institutions such as schools and nursing homes combined with more pellet stove owners purchasing an entire winter’s supply of pellets in the fall, which they did not do in previous years.

“We are in a tight supply right now,” said Dan Freihofer, operations manager for Woodpellets.com, a supplier in Bedford, N.H., that delivers directly to customers from warehouses in the Northeast.

Freihofer said when a customer who would buy two tons before the winter is now buying three tons for the entire winter, that 50 percent increase across the spectrum of customers will affect available supply.

“The change in purchasing behavior by customers has created a shortage,” Wilson said. “Most of available supply has already been committed to existing retailers.”

Freihofer’s recommendation to pellet stove owners who believe they will need more fuel later this winter is not to wait until they are down to their last 40-pound bag.

“He should be looking right now,” Freihofer said. “We are in a ‘just-in-time’ mode right now (for delivery).”

His business is now scheduling deliveries for mid-December.

Patty Marro, owner of Marro’s Home Center in Claremont, said her store experienced the early demand.

“We bought 450 tons for this year and they were sold in September,” said Marro, whose stores usually would sell about 200 tons annually. She anticipates another delivery in December and has about 50 names on a waiting list, though she noted that many of those could have already found another place to buy.

Area Home Depot stores also highlighted the “spotty” supply. The West Lebanon location said it had pellets a couple of weeks ago but last week said it was waiting for another delivery.

“I’d call every day,” said a store clerk.

Employees at the Claremont Home Depot were unloading a shipment of pellets on Sunday.

A recent posting on Woodpellets.com warned of the possibility of another shortage this winter for several reasons, including increased sales to Europe.

Wilson said manufacturers, retailers and consumers were all caught off guard by the cold last winter that began in December and did not let up until well into April. The effects of that cold continue to be felt by the wood pellet industry.

“(Demand) usually slows down in mid-March and we start building inventory for next winter,” Wilson said. “But that did not happen.”

Furthermore, even after it did warm up, consumers were ordering pellets for this winter to avoid getting caught short again.

“We saw a lot of sales in late spring and all summer long,” said Wilson, whose company has three facilities that operate 24 hours a day, year round making wood pellets that are 90 percent hardwood. “The buying frenzy usually begins in September or October and we were still supplying product from July and August orders. Our big rush began in August.”

Wilson said three years ago he would have about 50,000 tons ready to ship this time of year but now, he said, he has less than a third of that. Additionally, about a third of their business is for “bulk pellet customers,” such as schools and nursing homes, whose orders take priority.

The Pellet Fuel Institute in Washington, D.C., noted the increased early demand for pellets in a news release in early October, recommending that buyers space out their purchases.

“We want to caution people not to go out and stockpile for the season but to buy in smaller amounts,” Carrie Annand, a spokeswoman for the institute, said.

Annand said the pellet industry’s growth was in small manufacturers, and they lack the capital and capacity to ramp up production to meet the ever-increasing demand.

“A lot (of companies) manufacture just nine months out of the year,” Annand said.

She also said pellet stove sales are increasing on average 7 percent a year, which is contributing to the higher demand.

Sherman Griffin, owner of Upper Valley Stoves in Lebanon, said last winter there was an unprecedented demand for pellets.

“We were getting four to five truckloads a week in April (with 28 tons per truck) just to keep up because of the cold,” Griffin said.

Like others, he hoped to begin stockpiling in April and May but as soon as the pellets came in they went out the door.

For this year, Griffin said his store will be able to take care of their existing customer base, those who bought stoves or pellets from Upper Valley Stoves.

“My suppliers (Pennsylvania, Canada and Maine) have always come through,” Griffin said.

LaValley Building Supply recently informed its customers that its order of 40,000 tons of pellets that were pre-ordered by customers had been sold by New England Pellets to Home Depot. Neither Wilson nor Jeremy Stout, the marketing director at the West Lebanon LaValley, would discuss the letter or the arrangement between the two businesses.

Stout blamed the decision to sell the pellets on the acquisition last May of New England Wood Pellets by Rentech, of Los Angeles, an owner and operator of wood fibre processing and wood pellet production businesses. It was not clear if LaValley will stock pellets later this winter.

In an email, Stout said LaValley believes in “local first” and the letter was simply an apology and explanation to customers as to why the business could not deliver the pellets. He blamed the decision on a “Wall Street company from Los Angeles.”

Like any business that depends on the weather, Wilson said it can be a roll of the dice when it comes to the law of supply and demand. He said some think the early demand will free up supply come mid-winter, especially if the weather is not as severe as last year.

“There is that train of thought that things could slow up (with many buying a full winter’s supply),” Wilson said. “No one really knows. Each season is different. I think the industry should squeak through.”

The average price of a ton of pellets is between $240 and $275.

Patrick O’Grady can be reached at pogclmt@gmail.com.