From the Director's Desk:
A Forgettable February
Last week the EIA published the February 2022 data for its Monthly Densified Biomass Fuel Report, bringing into sharp focus a lackluster month that producers knew was ‘soft’ while it was unfolding.
Wood pellet manufacturers sold 113,332 tons in February, nearly 15% lower than the running average for the month. Bright spots were hard to come by in the data, but the East managed to put up a number in excess of its February average (64,041 tons vs. a February average of 61,379).
Production numbers hewed closer to long-term averages with the sector putting out 120,716 tons, about 8,000 tons shy of the 128,417 average for February production. The overage between production and sales rolled into inventory, bringing that nationwide inventory level to 183,751 tons nearly 70,000 tons more than was on the ground last year as February closed. This figure will be worth watching over the course of the next three or four months as the industry pushes towards its summertime peak inventory in July. Last year, inventories climbed nearly 200,000 tons from the end of February to the end of July. If inventories are laid down at the same pace this year, July will find nearly 400,000 tons of inventory on the ground.
Under normal circumstances, this forecasted inventory level might feel like too much. That said, this coming heating season promises to feel anything but normal. Unless something dramatic happens in the world geopolitically it seems likely that wood pellets will deliver a significant discount on space heating BTUs next fall and winter. If winter cooperates I suspect consumers with both pellet and heating oil options available to them will favor wood pellets increasing overall sales.
Complicating the picture even more is the demand being felt stateside for wood pellets in Europe as it works to shore up vacated Russian volumes from the annual churn.
It will be interesting to see if the data reveals ramped up production in spite of swelling inventory levels when the April, May, and June data are published later this summer and early fall. I suspect it might.
