Spring is generally a pretty good time to purchase your pellet fuel, as many suppliers offer ‘early buy’ sales and promotions. But with the convergence of a few significant influences that we’ve explained below, this spring may offer wood pellet consumers the best buying opportunity in many years.
Coming into this season, we saw a big inventory build across the entire industry, as both suppliers and retailers anticipated another year of very strong demand for wood pellets. For the last couple of winters, the supply of pellets has just barely kept up with the demand from consumers. Who could forget the pellet shortages in the winter of 2014? Manufacturers ramped up production, and prepared for another harsh winter by building up a giant inventory position.
Additionally, the low cost of diesel fuel allowed pellet mills from thousands of miles away to also bring product into the already crowded Northeast market, resulting in too much supply of wood pellets at the beginning of the season.
The situation was only made worse by the warmest February in recorded history. According to NASA, ” the Earth’s global temperatures in February 2016 were the most abnormally warm on record for any month ever recorded.” Furthermore, NOAA released its official assessment recently and proclaimed “this was America’s warmest winter on record”. These records go back to 1895.
The mild winter really took a toll on the pellet market this winter. For instance, we have one employee who typically burns 6 or more tons each winter, only burn three tons. In fact, there were stretches in February and March where he didn’t have to use his stove at all. We have heard similar stories from many other pellet users as well.
In addition to the mild winter and the big inventory build, the pellet market was also hit with a significant drop in energy prices. The price of crude oil dropped from $60 in May, to a low of $26 in February. As a result, the price of heating oil and propane also dropped this winter. With the cost savings for pellet heat having been reduced, some consumers returned to using fossil fuels as their primary heating source, and decreased their reliance on wood pellets. This switching of heating fuels reduced the demand for wood pellets even further.
To summarize, instead of record cold – we had record warmth. Instead of pellet shortages – we had dramatic oversupply conditions. Since pellet manufacturers and retailers have been left with too much inventory – many are lowering prices to help stimulate demand. Others are offering big clearance sales to help move product. This ‘perfect storm’ of factors has resulted in a short term drop in pellet prices; and a nice buying opportunity for consumers.
Therefore, if you have the ability to order this spring and store your pellets safely until the next heating season…you’re able to take advantage of the lowest pellet prices we have seen in years.