From the Director's Desk:
Miami’s Nice, PFI Heating Degree Index Active
Miami's Nice
I know. I know. I already made a Miami Vice reference in the Pellet Wire this month. Still, I loved that 80’s era of cop drama and if I can reference it twice in a month, I’m going to. Further, Miami is nice and our board was delighted in being there last week for our fall board meeting.
We intentionally co-located our board meeting with the Exporting Pellet Conference to provide our board members interested in learning more about the wood pellet market dynamics throughout the world the chance to do so. Our board members who attended got all of that and more. The energy crisis throughout Europe is very real and I’d like to say fascinating if so many people weren’t struggling so much as a result. Energy is enormously expensive across Europe right now as western Europe tries to fill the energy void created by Russian sanctions imposed after their invasion of Ukraine.
We’ve all heard this and have been following along as the situation unfolds. We’ve even understood and anticipated that stateside heating pellet producers would feel the market pull from European buyers this heating season. Still, when you are looking over someone’s shoulder at a cell phone picture of a sign reading €12,99 next to a 15 kg bag of pellets and you run the math in your head ($15.74 per 40 lb. bag, $787/ton), the point really sinks in. At those numbers, you start asking questions like, ‘why?’. The answers to the questions I asked were just as shocking. For instance, I wondered how much producers there are paying for raw materials. The answer I was offered was north of €200/ton for raw biomass. The US Dollar and the Euro are at near parity right now so the math is easy. $200/ton for raw biomass is about five times what producers here paid in June (nationwide average for wood product manufacturing residuals was $40.19). Power prices were being reported as in some instances 10x what they were 2 years ago. Pellet production takes a lot of fiber and a lot of electrons. Both are exceedingly expensive in Europe right now and one of the results is $800-900/ton heating pellets. This is why phones are ringing on a weekly if not daily basis at wood pellet production sites not just here in the U.S., but all across the world.
One last item of note from the conference. I haven’t followed the industrial wood pellet market on a week-to-week basis in four years. When I last tuned in there was great anticipation and optimism for the Japanese market. It sounds like those hopes have largely become reality. Japan is a major buyer of wood pellets, largely from Canadian producers operating out of British Columbia. According to the U.N. Comtrade Database Japan imported 1.05 million tons of Canadian pellets in 2021, up significantly from 592,000 tons in 2020.
Pellet Fuels Index Up and Running
Last year we launched the Pellet Fuels Index to track Heating Degree Days in twelve different locations from across the different pellet burning regions of the country. The data comes from the Climate Prediction Center and is updated by that organization weekly. We aggregate and post these 12 cities as a means of conveying the HDD trends in those areas, not pellet demand specifically in that location. Lewiston boasts just 5,000 inhabitants, but is a good stand in as a representative of the accumulated degree days in the northern Rockies.
Fair warning, there are some bizarre percentages showing up in the report. I dug into the report and was reminded that in many locations the heating degree days have just started accumulating. In fact, Little Rock has accumulated so few Heating Degree Days so far (just 2) that the data isn’t even useful to report. I expect towards the end of the month the Index will offer the more informative “at a glance” type of information we were hoping it would.
—Tim Portz Executive Director
