Wood pellet market heats up
Rising energy costs fueling demand for alternatives
By MICHELE DERUS
mderus@journalsentinel.com
Last Updated: Oct. 22, 2005
Wisconsin's leading and possibly only wood-pellet manufacturer has discovered the exhausting thrill of operating full-tilt.
"Our plant here is running at 100 percent capacity," said T.J. Morice, vice president of operations at Marth Wood Shaving Supply Inc. in Marathon. "We're going 24/7, and we have been for almost three months. We're doing everything we can to meet demand, but it's going to be a challenging winter."
It sure is. Natural-gas and heating oil/propane bills are forecast to climb about 48% and 30%, respectively, this winter, according to the U.S. Energy Information Administration.
Sales of alternative fuels are soaring in tandem.
Leading the pack are wood pellets, a compressed-sawdust product, and wood pellet stoves. The pellets sell for about $2 to $5 a 40-pound bag and the stoves, about $2,000 to $3,500 plus installation, according to industry Web sites. No chopping, no bugs . . . just pour a bag of pellets into the stove hopper and it'll burn for hours.
National trade groups say they're setting records.
"Pellet stove shipments jumped 59 percent in this year's second quarter - and that was before Hurricane Katrina affected (fossil fuel) production," said Leslie Wheeler, communications director for the Hearth, Patio & Barbecue Association in Arlington, Va. "In the 10 years I've been here, wood stove shipments have been way higher (than pellet stoves). But now they're competitive. In fact, it's hard to come by a pellet stove these days. They're on back order."
And wood pellets, the oblong puffs packed in 40-pound bags? "We passed the 1-million ton mark on sales for the first time last winter," reported Donald Kaiser, executive director of the Pellet Fuels Institute in Arlington, Va. "They're planning to ship another 350,000 tons this heating season - a 35 percent increase." That might or might not be a comfortable margin.
"Demand has been unprecedented," Kaiser said. "Our folks are increasing capacity at their plants to try and meet demand. But I don't think anyone could have anticipated what fuel costs would be, or the level of interest in our product."
Life sure is different for Marth Wood Shaving Supply Inc., a 47-year-old privately held company situated near Wisconsin's lumber-rich North Woods. Originally an animal bedding producer, the company now makes a host of wood-related products - with wood pellets its current star. By gearing up its second manufacturing plant outside Sioux City, Iowa, Marth will produce about 40,000 tons of wood pellets this year, Morice predicted.
"We projected a 30 percent increase in volume this year," he said. But autumn demand "has been more of a panic," he said. "You can't just flip a switch and double or triple production. We have plans for new plants, but they probably won't be available until next heating season."
Amid a nationwide clamoring for wood pellets, and the sawdust that produces them, loyalties are being tested.
Marth, the only Wisconsin company on the Pellet Fuels Institute's manufacturers' list and the only company Morice said he knows of here, is serving longtime customers first. As Morice put it: "Independents and chain stores - they're the ones who took a chance with us, invested in this industry years ago. It wouldn't be right" to simply sell to the highest bidder.
His suppliers are sticking by him, too.
"We work with a lot of mills, almost 50 of them. We pull in product from all over the state, and up to 250 miles away" in neighboring Indiana, Michigan and Minnesota.
Marth's buying territory overlaps, in part, that of Vulcan Wood Products in Vulcan, Mich., where owner Jeffery Goudreau said his wood pellet plant is running 20 hours a day, 7 days a week. His plant would be 24/7, too, Goudreau said, "but I need time to fix stuff."
Vulcan sells to the big-box home improvement chain Lowe's, plus a few hundred smaller customers. "Most people buy by the ton - that's 50, 40-pound bags. Up here, it takes about 5 tons to heat your house" for the year, Goudreau said.
Goudreau's Upper Peninsula plant produced 7,000 tons of wood pellets last year, drawing from all over the Midwest. "This year, we'll do 13,000 tons," he said. "If I could have made more, I could have sold more."
Vulcan would love to tap this state's North Woods sawdust supply, he said, but Marth has a lock on that turf.
Meanwhile, he fields calls and walk-ins from people who are eager to buy what sometimes they don't understand.
"They want to know how it heats, how many BTUs there are and is it better than oil or gas," Goudreau said. "I show them. Once they buy a stove, from me or Fleet Farm or Menard's, they come back and buy pellets."
If consumers found themselves unprepared for suddenly soaring energy prices, Goudreau said, so were wood-pellet manufacturers. At Vulcan, "we had 3,000 tons on the ground, which we thought would stay the winter. It was gone in a month."
For believers in biomass - that is, energy produced from organic matter - these are grand times. Among them is John Katers, professor of environmental engineering at University of Wisconsin-Green Bay and consultant to the conservation advocacy group Wisconsin Focus on Energy.
"The fairly large increase in natural gas prices last year - that was people's first wakeup call," Katers said. "Now, with another huge increase projected, we're seeing the commercial-industrial market paralleling the residential market in taking action."
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