After carrying the weight of the global economy since World War II with little fanfare, the lowly shipping pallet is finally commanding some respect.
Demand for the platforms used to haul nearly every consumer good or industrial ingredient is soaring amid a surge in e-commerce, forcing retailers and manufacturers to expand warehouses or pile inventories higher. At the same time, two keys to production — cheap lumber and labor — are scarce, and even nail costs are rising.
The result: Pallet prices have hit record highs, according to a U.S. Labor Department index, and European gauges show big jumps from the U.K. to Germany. The market may stay hot through the peak construction season in the springtime and as COVID-19 vaccines help revive restaurants and event venues — adding to inflationary pressures rippling across supply chains.
Pallets serve as the base of a so-called unit load, a standard way to ship products so they're easy to move with forklifts and jacks. They are generally bought or leased by product makers and get baked into transport packaging costs. When a retailer or other end user is finished with pallets, recycling companies collect, repair and resell them. Some industries like bottling companies manage their own pallet pools.
There are roughly 5 billion pallets in use worldwide, and an estimated 2 billion in the U.S. alone — enough to go two-thirds of the way to the moon if stacked on top of each other. About 90% are wooden and the rest are made of plastic, metal or cardboard. Each year, some 513 million new wood ones are built in the U.S. and another 326 million are repaired and put back in circulation, according to Horvath.
Depending on the region, the usual price tag of $ 9 to $ 12 per wooden pallet may approach $ 15 this year. On April 9, U.S. government data showed the wood-pallet component of the producer price index jumped in March by the most since 1993.
Pallets are made with a lower grade of hardwood and softwood than the timber used for construction and furniture. In the mid-Atlantic region, the price of pallet-grade hardwood rose to $ 635 per 1,000 board feet in March from $ 530 a year earlier, and a Southern California softwood more than doubled, to $ 520.
Adding to the squeeze is a dearth of workers willing to do the tough job of constructing pallets. Such strains would seem to provide an opening for plastic pallets, which are lighter, built to last longer, easier to sanitize, and pose fewer hazards like splinters and protruding nails. The downside to plastic pallets: They're about three times more expensive, meaning a shift from wood to plastic turns what most companies view as throw-away packaging into pricey assets that need to be managed.
Before the pandemic, the overall pallet market was growing at about 5% to 7% annually.
Marshall White, a Virginia Tech professor emeritus and a developer of pallet-design software, said it's reasonable to expect plastic could reach 10% of the market over the long term, from about 5% to 6% now.
"Wood pallets will continue to dominate, until the time that we find the physics to dematerialize toilet paper at Procter & Gamble and rematerialize it in my house with some magic device," he said.
(c) based on ttnews.com