Wood pellet supply fails to meet demand

By Eric Russell, BDN Staff
Posted Sept. 30, 2008, at 9:07 p.m.

Wood pellet manufacturers and suppliers in Maine are urging consumers to be patient and let supply catch up to demand as the winter heating season approaches.

In the last several weeks, a number of pellet fuel distributors in Greater Bangor have been running out of pellets within a day or two of shipments. Many have been simply catching up on pre-sale orders that were made earlier this summer from customers looking to buy in bulk.

This stockpiling of pellets — heating fuel made from wood waste and sawdust that is pressurized into compact pieces — has created a unique bubble in the market, pellet experts said.

“The analogy I’ve been using is that if everybody who uses oil had [an empty 275-gallon oil tank] and wanted to take their entire full supply in July, there wouldn’t be any oil left either,” said George Soffron, CEO of Corinth Wood Pellets LLC, the state’s largest pellet manufacturer. “People need to hang on.”

The increase in sales of pellet stoves in the last few years has created a growing demand for fuel to feed these stoves. While pellet manufacturers have indicated that they are equipped to meet this demand, they can’t do it all at once.

“Everyone wanted pellets in July it seems,” Soffron said. “And I’ve heard of people buying a two-year supply of pellets, which is ridiculous. There is no need to do that.”

Bruce Linkletter of Maine Wood Pellets Co. in Athens said his plant is running at only about 70 percent production and is struggling to keep up. The company is making adjustments to increase production, but things are going to be a little tight for a while, he said.

“So many people have switched over to pellets, and I think people are panicking and buying in bulk,” Linkletter said. “If people are patient, there are plenty of pellets to go around.”

For homeowners who bought early in July, the supply issue is not a factor, but those who got a late start for whatever reason are coming up empty.

Urban Dyer, warehouse manager at Dysart’s in Hermon, said customers were buying pellets in bulk all summer long.

“We were selling 60 or 70 tons a day and it didn’t take long for them to disappear,” he said Tuesday, while waiting for a new shipment of pellets to unload.

From a consumer point of view, there is incentive to buy in bulk. A homeowner who has a 275-gallon oil tank can buy a maximum of only 275 gallons at a time, but if folks have plenty of storage, they can buy and store as many pellets as they can afford. The current average price for a ton of pellets is about $300, but some distributors offer discounts for large sales, which increases the incentive.

The drawback has been a gap on the supply end.

“We’re doing what we can,” Linkletter said. “Our major suppliers are understanding, but they are getting pressured all the time by customers.”

Soffron said he has asked distributors to spread out the amount they sell so they don’t run out. He stressed that the current concern is not about supply per se, because his plant will continue producing pellets all winter.

“We don’t have issues getting supply,” he said. “We get all sorts of board ends and other wood waste. People want to sell to us. While some [manufacturers] have had problem, we haven’t.”

Soffron also said Corinth Wood Pellets is producing twice as much as it did six months ago and recently made investments that will allow the plant to increase output further. He also boasted that 70 percent of what is manufactured in Corinth stays in Maine.

“One of the great things about Maine is that we’re resourceful,” he said. “And there is a lot of wood here. Maine could really be a leader in this industry.”

http://bangordailynews.com/2008/09/30/news/state/wood-pellet-supply-fails-to-meet-demand/ printed on September 19, 2014