From the Director’s Desk: A Nip to the Air, September EIA Data Recap
A Nip to the Air
Just before the Thanksgiving holiday, I tuned into the ten o’clock news, largely to get a sense of the weather for the holiday weekend. The forecast, the meteorologist noted, included single-digit temperatures on Sunday, December 1. The predicted low for Sunday was 9 degrees, already besting the lowest temperature in all of December 2023. The coldest it got in the Twin Cities last year was 16 degrees, balmy by Minnesota standards. This Thanksgiving cold snap brought Heating Degree Day totals back in line with last year’s after having trailed by as much as 25%. The forecast includes at least one more day with single-digit lows this week before a return to the “highs in the low 30s, lows in the 20s” pattern that can dominate December here.
In Strong, Maine, snow returns to the forecast on Thursday and Friday, and AccuWeather currently shows air temperatures in Strong on Saturday morning as a “very cold” 12 degrees. The folks at the White Elephant in Strong better have their coffee and hot chocolate machines topped off this weekend.
This is the kind of weather the sector needs. As the September EIA data recap (see below) makes clear, producers need to see Heating Degree Days (HDD) make a jump over last year’s dismal numbers. This week’s PFI HDD index shows HDDs trailing in all markets. What it doesn’t show is that every market made significant gains on last year’s pace, and I have confidence that next week we will see locales in the index that are ahead of last year’s pace. If producers hope to see the return of strong sales months, it is this kind of weather that needs to show up and stay awhile.
September EIA Data Recap
The numbers (5-year average):
September 2024
East
Sales – 104,812 (124,720)
Production – 87,561 (107,994)
Inventory – 168,314 (119,358)
West
Sales – 38,467 (60,380)
Production –30,908 (38,779)
Inventory – 93,518 (67,148)
South
Sales – 24,682 (36,396)
Production – 12,916 (19,538)
Inventory – 50,468 (39,596)
All U.S.
Sales – 167,961 (209,615)
Production – 131,185 (167,294)
Inventory – 312,120 (264,041)
The data released by the Energy Information Administration earlier this week reveals a September that looks a lot like the August that preceded it: lackluster sales and trimmed production to reduce standing inventory levels. I suspect that production will lag sales for the next three data cycles (October–December) as producers continue to look to right-size inventory levels while attempting to divine winter's length and depth.
The average total U.S. output for Q4 was just over 500,000 tons. Average sales for Q4 are just short of 600,000 tons. Assuming the averages play out, producers will exit 2024 with somewhere around 210,000 tons of inventory on the ground—a number I suspect the industry is more comfortable with than 300,000 tons. The X-factor, of course, is a prolonged cold snap somewhere in the fourth quarter. In the oft-ballyhooed 2018–2019 heating season, producers shipped just shy of 725,000 tons of wood pellets in the final quarter of 2018.
The good news is that, should winter brew up that kind of weather, the industry is prepared with strong inventory levels at hand. The challenge is that 2018’s final quarter is an outlier. In two of the last three years, sales failed to even achieve the average and fell well short of 550,000 tons. Heating Degree Days throughout November have lagged even last year’s mild temperatures, but December has absolutely gotten off to a colder start in most pellet markets. Perhaps Jack Frost will serve up a crisp, brisk winter of yesteryear for the rest of this month.
