Company Release
Energex today announced a price increase on residential wood pellets.
MIFFLINTOWN , PA (September 1, 2008)
Oil prices over $120 per barrel continue to drive growth in the pellet fuel market. Many appliance manufacturers can’t fill new orders until February and are implementing allocation systems for the balance of the year. The demand for pellet fuel in the East is higher than ever and producers are struggling to keep up. Further straining the supply, many pellet plants do not operate dryers and can only make pellets when dry dust is available. A slumping economy, stagnant housing market and alternative uses for dry dust are limiting this raw material supply nationwide and prices continue to escalate.
Darryl Rose, Energex VP of Marketing: “We continue to invest in plant and equipment to keep pace with the growing demand for pellet fuel and the changes in raw material supply. The dryer in our Quebec plant, which has processed millions of tons of pellet fuel, reached the end of its useful life and was replaced in July. Our plant will be back in production on August 4, after a five-week shutdown. Many additional capital projects were completed during this period to further improve the production capacity of this facility.”
“In Pennsylvania, we installed 2 additional pellet mills and a new dryer will be installed in April 2009. In past years, 75% of our dust came into our plant bone dry, which enabled us to bypass the dryer. Now, close to 90% of our raw material is wet and our current dryer is a production constraint. This change in raw material feedstock is a direct result of the present state of the economy and unfortunately we had little advance notice. It takes months to source and install a dryer and it isn’t possible to do this project for the current heating season. Next season, we will have a fully functioning four mill plant capable of processing an additional 50,000 tons of premium grade fuel. This change in raw material availability has limited current production and we will be allocating fuel throughout the remainder of the season.”
For this heating season, Energex may have additional fuel available from Quebec in the new year. For consumers with appliances that can burn non-premium fuel, fuel will be available with an ash content of 2%-3%. This fuel has a high BTU value and is ideal for Harman, Quadra-Fire Mount Vernon AE’s and multi-fuel stoves. The price for this fuel will be lower than the premium grade fuel price.
The sawdust shortage in Quebec is similar to that in Pennsylvania and other parts of the United States. Much of the lumber cut in Energex’s region is dimensional lumber for the housing market and because of cutbacks in housing construction, Energex is unable to purchase enough sawdust to satisfy existing commitments and to make additional premium grade fuel available. The company has decided to purchase very expensive, clean, white fiber. The accompanying chart illustrates the increase in raw material costs since 2005.
As a result of continuing raw material cost increases and additional grinding and drying costs associated with raw material supply, Energex is forced to raise the price for all premium grade fuel $25 per ton effective September 1, 2008.
Company Release
Energex today announced a price increase on residential wood pellets.
MIFFLINTOWN , PA (June 1, 2008)
This year is shaping up to be the industry’s best in recent memory, probably surpassing the “Katrina year” of 2005. Many dealers are reporting they are seeing the same feverish buying activity as 2005. Oil prices have soared above previous record highs and there is talk of gasoline going to unthinkable levels in the coming months.
The pellet fuel industry cannot have another season of limited fuel supply without risking turning away existing and potential new customers. To keep up with this demand and avoid the shortage of prior seasons, Energex has doubled the pellet mill capacity in its’ PA facility. Energex is committed to continuing to expand its capacity in order to provide the market the fuel it needs to continue to grow.
In the face of all this industry optimism, there is one major growing dark cloud: sawdust availability and pricing (see attached article from MSNBC.com). The slumping economy and pending mortgage foreclosures have had a dramatic affect on new housing starts. As a result, sawmills are shutting down and sawdust is becoming harder to find, driving up costs and forcing us to turn to more expensive raw materials. From attached Wall Street Journal article:
“From Maine to Oregon, the price of sawdust, along with other wood byproducts, has soared.”
“… never thought he’d see sawdust at $100 a ton.”
“The shortage has sent Mr Johnson on a cross-country-even cross-border-scavenger hunt. [for sawdust]”
These shortages have been sweeping through the pellet fuel industry nationwide and are further aggravated by record high diesel prices. Inbound freight costs are rapidly escalating as producers not only pay more for fuel, but are forced to go greater distances to secure raw materials. Rising oil prices are also driving up many other costs, everything from plastic bags to electricity.
In light of these rising production costs, Energex will be implementing a price increase effective June 1 of $20 per ton. The company has made every effort to reduce internal costs and improve efficiencies. If Energex is to remain a strong, reliable supplier and if the pellet fuel industry is to remain viable long term, these higher costs must be passed through to the consumer. Pellet fuel is still a tremendous bargain. At a retail price of $299 / ton, pellet fuel would cost approximately $23 per million BTU’s compared to heating oil at $39 and propane at $59. Since 2006, the average price of pellets has risen only 9% compared to heating oil at 77% and propane at 84%. This price gap continues to widen as fossil fuel prices rise on a near daily basis.
Energex has been a major producer of high quality pellet fuel for decades and stand committed to supplying the needs of you and your customers over the coming heating season.
