DanforthPewterers,Ltd.docVIP

II. INDUSTRY INFORMATION 1. Organization The pellet industry has its roots in the energy crisis of the early 1970s. The Arab oil embargo forced consumers to consider how reliant they’d become on various sources of energy, particularly oil. Burning of oil for heating purposes became extremely expensive and was quickly regarded by many consumers as squandering a valuable non-renewable resource. The 1970s saw the return of burning wood as a source of home heating. This renewed interest in utilizing wood as a renewable energy source fostered the resurgence of the few remaining wood stove manufacturers and the creation of many others. The introduction of wood pellets in the mid 1980s offered a viable new fuel source. Pellets are made from waste and scrap from saw mills and other wood product manufacturers. They can also be made from a mixture of cardboard and other waste papers, which can alleviate the burden on landfills. The heating value of wood pellet fuel is 1? times that of cordwood, but produces far fewer emissions and particularly no ash. Residential fuel pellets are packaged in 40 lb.bags and can be stored in one-third the space needed for cordwood. Currently, there are approximately 25 to 30 U.S. manufacturers of pellet fuel. Competitors tend to service regional markets due to the cost of transportation of what is a bulky product. There are at least 15 Canadian competitors located near the U.S. border, who are penetrating the U.S. market. The largest Canadian competitor, Energex of Lac-Meganic in Quebec, Canada, has purchased one U.S. pellet manufacturer and has sales offices in several U.S. locations. 2. Import Impact Imports from Canada have increased their share of the U.S. market versus domestic competitors. Canadian imports tend to be lower in price due to the favorable exchange rate of the Canadian dollar (65 percent of the U.S. dollar) and low raw material (woodscrap) costs. Canada has a large wood product industry. The Canadian