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Wood Pellet Update 13 December 2017

Pearsons of Duns will have a delivery of bagged Wood Pellets arriving early next week (week commencing 18/12/17).  Initially we will be limiting the quantity that can be ordered per customer. We advise calling 01361 882277 #1 if you have not already done so, to add your details to our waiting list. 

We will have a slow steady supply of stock which will enable us to hopefully fulfill and satisfy the seasonal demand throughout late December.

Why?

If you are shopping for bagged wood pellets right now you’ve probably noticed that most retailers are short of stock, or have dramatically increased their prices.  There is a Europe wide shortage of wood fibre (the raw materials pellets are made from), coupled with Verdo Renewables suspending all sales channels due to flooding at their Grangemouth site, this has restricted supply and massively increased the cost of pellets.

The short-term availability will remain patchy throughout December, normalising to some extent early in the New Year, but prices will remain uncertain until at least April.

Situation in the European Market

The European pellet market over the last couple of years has been in a position of oversupply.

With large quantities of the wood fibre used to manufacture pellets combined with a number of mild winters contributed to a buyer’s market where pellets were readily available and prices at historic lows.

Many European biomass fuelled power stations have come on line.  Which has created significant demand for the same raw material.  Additionally, Europe has had a warm and wet Autumn which has led to timber operations in many European forests being halted, as they rely on frozen ground providing access into the forests for their heavy machinery, if not their operations are significantly hampered due to access and their kit getting stuck.

There is a higher demand from both the traditional wood pellet market and biomass power industry and significantly lower supply of raw material. Raw Material costs has increased by as much as 90%, in others the raw material just isn’t available, regardless of what one is willing to pay.  Due to this shortage, many of the pellet producers are running at reduced capacities.  Quite a lot have ceased production until the raw materials are available again.  Finished pellet prices are now around 20% - 30% higher now than they were last year.
 

Impact in the UK Market

The UK imports more than we export of wood pellets, hence any price changes in Europe are quickly reflected. UK producers who have been forced to sell at a loss in recent years to compete with imports can now charge a ‘sensible’ price to their retailers.

Pearsons of Duns prides itself on holding sufficient Verdo bagged stock to deal with any increased demand. But it seems some of our competitors did not! Hence when customers were not able to buy from their normal retailer, they bought from us instead.  Unfortunately, our stock holding was not able to keep up with the demand, combined with a delay in inbound stock.

We are still experiencing much stronger sales of pellets than anticipated for the time of year.  As a result, all our pellets are currently being sold with a future dispatch date.  We never sell anything that we don’t have, so whilst there might be a delay in dispatch compared to our normal delivery service, you can be confident that if we have sold you pellets, these will be delivered as soon as possible.

Impact for Pearsons of Duns

We are expecting the supply of pellets to be patchy throughout December.  However, we are confident that come the New Year things will have settled.  We will be taking orders and dispatching orders throughout all of December including the days in-between Christmas and New Year.

In terms of pricing, we anticipate prices will increase marginally from current levels from now until the end of January until the market can react & speed up production.

 Retail prices are currently up 10 - 15% on a year ago. Wholesale prices have increased 20-30% and raw material prices have increased by up to 90%.  The market as a whole has done well at finding additional efficiencies and absorbing costs in order to limit the price increase being passed on to consumers.

 

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