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ReviewofNorthAmericanPelletHea5ngMarkets
SethWalkerSeniorEconomist
DirectorofBusinessDevelopmentFutureMetrics
FutureMetrics
IntelligentAnalysisandStrategicLeadershipforthePelletSector
8AirportRoad Bethel,ME04217,USAwww.FutureMetrics.com
CanadianPelletIndustryExposuretoNorthAmericanHeaNngMarkets
• Lastyear,bothmarketswere~170kmt
• CanadiandemandremainsfairlysteadydespitepoormarketcondiNons
• USexportsdown22%fromhighsin2014(219,000mt)
©2017FutureMetrics,LLC
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12-13 13-14 14-15 15-16 16-17
ThousandMT
CanadianPelletDemand ExportstoUSA
WhyissomuchoftheUSwoodpelletmarketconcentratedinthe
Northeast?
©2017FutureMetrics,LLC
84%ofhea:ngoilsalesintheUSareintheNortheastOil+Propanearetheprimarytargetsforpellets
Lowoilprices?Thepelletindustryhasanaturalgasproblem…
Historicallylowhea:ngoilpricesares:llsignificantlyhigherthannaturalgasprices
©2017FutureMetrics,LLC
USPelletStoveSales
©2017FutureMetrics,LLC
• Boomyearsforpelletstoveshipmentscorrelatestronglytowhennaturalgaspriceswerehistoricallyhigh
• FutureMetricsesNmates~900kstovesincirculaNonintheUS
HeaNngMarketDrivers:OilPrices
©2017FutureMetrics,LLC
Source:EIA,FutureMetrics
NewE ng landHeating OilP ric es$/gallonandpelletequiv ilent
205
255
305
355
405
455
505
1.80
2.30
2.80
3.30
3.80
4.30
Oct-2011
Jan-2012
Apr-2012
Jul-2012
Oct-2012
Jan-2013
Apr-2013
Jul-2013
Oct-2013
Jan-2014
Apr-2014
Jul-2014
Oct-2014
Jan-2015
Apr-2015
Jul-2015
Oct-2015
Jan-2016
Apr-2016
Jul-2016
Oct-2016
Jan-2017
$/tonpe
llete
quivilent
$/gal
HeaNngMarketDrivers:Weather
©2017FutureMetrics,LLC
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100
110
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130
98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17
US Pellet HDD Index Long term average = 100
E. N. Central Middle Atlantic Mountain New England Pacific W. N. Central
Source:FutureMetrics
US R es identialPe lletDemandF orecas tMillionMT
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
3.0
08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18est
80
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100
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110
115
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Adjusted
PelletD
emand
HDDInde
x
AdjustedPelletDemandPelletHDDIndex
EsNmaNngUSPelletDemand
©2017FutureMetrics,LLC
CanadianResidenNalPelletMarketGrowth
©2017FutureMetrics,LLC
Source:HPBA,FutureMetrics
C anadianPelletS toveS tockandS hipments
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1998
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2018est
Shipmen
ts-Thou
sand
s
Stock-Tho
usands
StoveStock
StoveShipments
• SNllanemergingmarket
• GeneralupwardtrenddespitedifficultmarketcondiNons
• AccordingtoHPBA2015wasthehighestyearforCanadianstovesales
• UShasn’tcomeclosetohighsreachedinthemiddleofthelastdecade
Source:FutureMetrics
C anadianR es identialPe lletDemandF orecas tThous andMT
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120
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08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18est
HDDInde
x
Adjusted
PelletD
emand
CanadianResidenNalPelletDemand
©2017FutureMetrics,LLC
CurrentMarketCondiNons:ProducNon
• 2.3millionstofinstalledcapacityinUSNortheastandNorthCentral
• CapacityUNlizaNon“recovered”to34%inJune
• Upfrom22%inApril
• Healthylevels>70%forthisindustry
©2017FutureMetrics,LLC
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0
0.5
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2.5
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-1
6Au
g-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Prod
uc5o
n–Th
ousand
ST
Capa
city–M
illionST
EIASurvey:“USEast”PelletCapacityandProduc5on
CurrentMarketCondiNons:Inventory
• Inventorygrowthhaspickedupmarginallyoverthelastfewmonths
• Overallproducershavedoneamuchbeierjobcontrollinginventorybuildakerthesecondmildwinterinarow
• Inventorylevels8%lessinJune‘17thantheywereinJune‘16
©2017FutureMetrics,LLC
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
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450
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-1
6Au
g-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
%Cha
ngeinIn
ventory
Inventory–Th
ousand
ST
EIASurvey:US“East”PremiumPelletInventory
FutureMetricsNewEnglandPelletPriceSurvey
• FutureMetricsisnowcollecNngdetailedretailpricingdataonamonthlybasisinNewEngland,including:– Retailer– Brand– State
• Insightslike:– Dougfirpelletscarryan$81premiumoverblendedorspeciesnotspecifiedpellets
©2017FutureMetrics,LLC
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336
$200
$220
$240
$260
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$300
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$360
Blend/NS Hardwood Sokwood DougFir
NewEnglandRetailBaggedPrices–byspeciesUSD/ST
ShortTermOutlookforNorthAmericanPelletHeaNngMarkets
• Lowoilprices• Comingoff2warmwinters
ChallengesRemain
• ProducershavebeenmorecauNousthisyear• Capacityexpansionhasbeenvirtuallynon-existent
OntheBrightSide
• Areturntoa“normal”wintermeans~200,000tonsofaddiNonaldemand
• Shorttermoutlookforoildoesn’toffermuchhelpOutlook
©2017FutureMetrics,LLC
