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Eia Data: Wood Pellet Manufacturers' Challenges in the First Half of 2020

Date: 10/12/2020 08:48:39 From: Clicks:

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In September, the U.S. Energy Information Administration’s Monthly Densified Biomass Fuel Report was updated with June data, providing a comprehensive look at how the industry fared in the first half of the year. The numbers show that not only have wood pellet producers managed to navigate the challenges of the business disruption presented by the COVID-19 pandemic, they’ve set themselves up with a legitimate chance at the biggest year in the report’s five-year history.

Eia Data: Wood Pellet Manufacturers' Challenges in the First Half of 2020
Eia Data: Wood Pellet Manufacturers' Challenges in the First Half of 2020

As the economy rapidly wound down in late March, three big questions emerged for pellet producers. First, would COVID-19 lead to a plant shutdown, either because of infections within the plant staff roster or because of a state or federal mandate? Second, would fiber streams dry up because of stoppages at upstream wood product manufacturing sites for similar reasons, or a rapid downturn in consumer demand for those products? And finally, would critical retail outlets where wood pellets are sold remain open and able to sell our product to consumers?

The first question was at least partially answered early in the pandemic as the forest products industry and the associations that represent it, including the Pellet Fuels Institute, went to work to ensure that governors followed federal guidance and classified these operations as essential businesses, allowing them to maintain operations. Keeping plant teams safe, virus-free and able to work has taken a comprehensive and sustained effort that continues today. So far, it has not cost any facility significant production time. The EIA data certainly supports this assertion, showing production of 955,000 tons through June, the largest first half in the history of the report, and up 4% from the same time period last year, which saw production of more than 2 million tons. At the beginning of the year, production was trending well ahead of the 2019 pace with manufacturers logging strong numbers in January (184,451 tons) and February (168,559 tons). Manufacturers managed to stay ahead of the 2019 pace through March (158,633 tons), even as the pandemic threatened the second half of the month’s production. April (122,657) and May (143,796) do indicate evidence of a disruption as producers failed to achieve 2019 production levels, but they recovered, posting strong numbers in June (177,485), eclipsing June 2019 totals by 7%.

The data tells a similar story regarding fiber availability. Through June 2019, wood pellet manufacturers purchased 6.7 million tons of upstream residuals (sawmill, wood product manufacturing, other). In the first half of 2020, even with three full months falling within a global pandemic, producers successfully sourced even more fiber, buying nearly 6.9 million tons.

Finally, EIA data should assuage anyone’s fears that retailers would be unable to move pellet inventories and purchase orders would slow. Through June, pellet manufacturers sold a record 943,448 tons, up 6% from last year’s first half, indicating high confidence in consumer demand by retailers, surely underpinned by strong in-store sales.

wood pellet in bags
wood pellet in bags

These data points tightly correlate to an aggregate of the stories I have heard from members, but they don’t capture the individual disruptions and challenges I know some producers have faced. I have also heard stories about facilities posting record years, and for the numbers to shake out the way they have so far, more producers are having an up year in 2020 than are having a down year. Considering the fate of so many other industries that, by their very nature, couldn’t escape the fallout of COVID-19, the wood pellet sector should feel very good about where it is right now.

We are a long way from the end of the year, and the challenges for producers keep coming. Wildfires have disrupted business in key forest product manufacturing sites in the West and Pacific Northwest, and at least one important regional producer had to halt operations because of nearby fires. Production time is nearly impossible to replace, and it would not surprise me to see these fire-related stoppages and slowdowns show up in the September EIA data.

Our industry’s ability to keep fiber streams flowing, presses turning and trucks loading in a year that has brought a once-in-a-lifetime pandemic is impressive, but from my perspective, the most notable of these three achievements is the total sales numbers. The market is clearly calling for wood pellets, and so far this year—in spite of everything—manufacturers have figured out a way to answer the call.

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