The price of pellets will be severely affected by long-term contracts for wood pellets. In fact, as mentioned above, the volatility of the spot market increases because most markets are long-term contracts. Since such a large proportion of the market is already under a long-term "buy or pay" contract, when the market is in a period of oversupply or oversupply, most market adjustments must occur between 10% and 20% of the total market occupied by the spot trading market. Within the amount. In the long run, contract prices and spot prices should approach market equilibrium prices.
The inherent costs of producing and delivering pellets, including typical profit margins, will determine the market price of long-term supply contracts.
Many forecasting models use oil prices as an important factor in cost uncertainty. Harvesting and transporting wood to pellet mills, converting to pellets, and transporting logistics by truck, rail, and ship, all involve significant fuel costs (such as diesel and marine fuels). FutureMetrics uses the US Energy Information Administration's (EIA) forecast for oil prices (West Texas Intermediate Crude Oil or WTI). The chart below shows EIA's forecast for oil prices (assuming an annual inflation rate of 2% in U.S. dollars) and the range of actual price forecasts.
EIA's prediction of oil prices and the range of actual prices
Historical pellet shipping rates provide insight into the expected long-term market liquidation rates for ships of typical sizes from various pellet export terminals. FutureMetrics does not attempt to predict short-to-medium-term drivers of fluctuations in transportation costs.
1. Cost of wood delivered to pellet mill
2. Granulator conversion cost (excluding wood cost)
3. Expected profit rate of pellet manufacturers (using EBITDA per ton as a model input)
4. Inland transportation from factory to port, and port storage and loading costs
The expected EBITDA / ton is based on historical data from two listed manufacturers (Pinnacle and Enviva, see table below), and future measurement data based on due diligence analysis of existing pellet mills.
Based on several assumptions, the forecast price for the next 10 years is shown below.
the forecast price for the next 10 years
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With the sales contract, the order tracking clerk checks the models and quantities of each machine and spare parts.
Quality Test Before Delivery
Upon completion of the manufacturing of equipment, tthe quality inspector strictly checks quality of every machine with the checklist.
Check Items When Packing
Before packaging and shipment, the order tracking clerk checks the packaged items again with the packing list to avoid loss of items.
Sign the contract
Adopting international common standards for accurate design of product packaging, prevent product damage rate and the effective use of transport tools, which ensure the perfect delivery of products.
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