After a promising June that saw near record sales for the month, premium wood pellet sales in July returned to the well-below-average trend the sector has been mired in since late last spring. So far in 2024, June stands alone for months that have topped their five-year averages, and producers are trimming their production throttles, reticent to build wood pellet inventories larger than those already on the ground. As June closed, U.S. total inventory settled at 393,404 tons, the highest position since October 2017. Summertime production totals reveal that plant management teams have considered full storage sites and slow early buying activity, trimming their output to just 235,000 tons in June and July, well off the 304,352 tons produced during the same time period last summer. Wood pellet inventories create more than just problems of space for producers. Each ton brings with it costs of production and storage, locking up precious cash flow until shipped. As July closed, the wholesale value of wood pellets in producer inventories topped $72 million.Balancing inventories with expected monthly sales and planned production has been an industry balancing act that, until 2016, was done without access to any reliable data about what the rest of the sector was doing. Prior to 2016, producers gathered what information they could from their customers and wood suppliers, and by visually inspecting their competitors storage sites. Upon the launch of the U.S. Monthly Densified Biomass Fuel Report by the U.S. Energy Information Administration, producers gained access to critical industry production, sales and inventory information and immediately began using this newly gained intelligence in their operational decisions. Just six months after the report was launched in 2016, inventory levels had swollen to over 600,000 tons of inventory. As production and sales data accumulated in 2016 and early 2017, it became clear that 600,000 tons was too much inventory for the sector to carry. For the following 18 months, producers trimmed inventory levels, settling out around 373,000 tons at the end of July, more or less where the industry found itself this July.The success of this season and the financial consequences or rewards of building the industry’s highest inventory position in over five years will depend upon the length and depth of winter, and the resulting rate of depletion on the amassed inventory. Depending upon the year, wood pellet sales begin to outstrip total production in August or September. To make up for the difference, producers draw upon their accumulated inventory and the process of depletion begins. This up-and-down cycle finds producers with their highest inventory positions in July and August and their lowest in early spring (February and March), and has played out like this since inventory positions stabilized into this pattern in 2018.&nbsp;In July 2018, inventory levels were 373,693 tons, and in just six months, the bulk of the 2018-’19 heating season—all but 46,642 tons of inventory—had been sold a drawdown of over 300,000 tons. In the East, there were some nervous retailers as inventory levels dipped to just 18,448 tons, a stunning departure from the February 2017 regional position of 350,982 tons. Last year’s inventory drawdown was blunted by mild temperatures across the predominant wood pellet-burning regions of the country. Inventories fell slowly from August through January, dropping just 70,000 tons before inventories began to build again in February.&nbsp;The premium wood pellet sector has its best heating seasons whenever the industry sees multiple months with 200,000 tons or more in sales. During the 2018-’19 heating season, producers eclipsed 200,000 tons in sales in September, October, November and January. Both August and December were over 190,000 tons. At press time, summertime temperatures had yet to yield to those first brisk morning and overnight lows that have customers turning up their thermostats and filling those burn pans with wood pellets. &nbsp;&nbsp;Whether or not these near-historic inventory levels are a boon for producers in the context of a long and prolonged winter during which they are happy to have every last ton, or an albatross around their necks next spring, all hinges on what kind of winter weather shows up this year. Author: Tim Portz&nbsp; Executive Director, Pellet Fuels Institute&nbsp; tim@pelletheat.org&nbsp; www.pelletheat.org&nbsp;

2024-11-11 - Pulling for a Winter of 2018- '19 Reboot (Biomass Magazine)

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The success of this season will depend upon the length and depth of winter, and the resulting rate of depletion on the amassed inventory

Pulling for a Winter of 2018- '19 Reboot

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