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Market Update: Hardwood Inventories Returning to Normal
The low-grade hardwood shortage that has gone on for more than three years finally has found some relief. Low-grade hardwood is not abundant, but many contacts report normal or close to normal inventories.
By Jeff McBee
Date Posted: 7/1/2006
Coming off the best Richmond Show in years, everybody knows that the pallet industry is running strong. Business is good, profits are improved, and attitudes are upbeat for a change. For several years owners of sawmills and pallet companies have walked around machinery shows with anything but a spring in their gate. This May, at Richmond, the picture was different. The obvious question is in light of today’s improved environment, what do things look like for tomorrow?
First, let’s take a closer look at today. The economy is on a roll, so pallet orders are strong. We have recently come off the most difficult three years in history for hardwood supplies. Supplies are improved, but excess material is still not common in this more stable environment. Prices and supplies are now stable, and there is little on the horizon that suggests much of a change in the immediate future.
The pallet recycling industry has been on a long busy roll. After a short period of heavier core supplies a few years ago, the availability of cores and their quality have hit a new low. Recyclers have had a difficult time making up any short fall in the supply of new pallets during the last couple of years. If the current core crunch persists, as most people expect, recyclers will continue to be pushed to provide.
The bottom line is that the industry is busy, with few signs of any significant change in the short run. The economy has been very strong, but many signs suggest that the future will likely see stability or some degree of weakening. So, all of us came away from Richmond with a good feeling inside and a degree of optimism, but with a little bit of concern about tomorrow’s economy and its impact.
Where do we stand on major issues facing the pallet industry? There is more optimism over the export of Canadian softwood lumber into the U.S. This struggle dates back many years, even several decades. The mood is better for a resolution to this problem than at any time in many years. But the British Columbia government is taking a tough stance, so the jury is still out. Maybe we will know something before too long. Many will argue that the solution being examined leaves something to be desired, but the border export situation is more stable today than it has been for several years.
Labor continues to be one of the industry’s biggest issues; nobody expects that to change any time soon. Our industry is in the thicket of the immigration issue now, whether or not we want to be. The IFCO raids thrust the pallet industry into the public limelight, and it put us squarely in the government’s sights. But we can endure this development by having thorough, well documented hiring practices. This situation is not likely to change anytime soon, so if any of our readers have not established an effective hiring policy, now is the time to act.
What is happening in the world of pallet management? Several observations are in order. The tension that has existed between CHEP and the pallet industry has subsided somewhat as some of the law suits have been settled. Don’t misread me. The tension is certainly not gone, but it is not as intense as it once was. My guess is that progress in managing pallets will continue. PECO has grown quietly but it is still a long way from challenging CHEP in the pallet rental arena. Pal-Net is a relatively new white wood network that includes some prominent wooden pallet companies. Bob Moore, former CEO of CHEP, recently launched iGPS, a new RFID tagged, plastic pallet rental pool (article in this issue). His pooling ideas sound interesting, but past experience with expensive plastic pallets outside of a real closed environment still raises eyebrows. Successful pallet management, whether rental or pooling, requires a system that offers controls; certainly RFID represents an interesting possibility. Many of these management systems may be personalized to meet specific needs. The future for pallet management continues to be strong, but it will be a long road. It is not a quick fix to any of the problems in our industry, but I still believe it holds a prominent place in the future of many progressive pallet companies.
Another issue on the pallet radar screen is control of internal company information for effective management. More and more pallet companies are developing better computerized systems to store and manage company information for better decision making. The ERP article in this issue provides
I am excited about the positive attitude in our industry today and look forward to a productive, interesting, and challenging future. Thanks for supporting our efforts over the past 25 years by being a loyal reader and providing input into what we write. Thanks for supporting our advertisers. Remember that they are the ones who have made the Enterprise possible. Readers receive this magazine as complements of our advertisers. Thank them for supporting your magazine; tell them you saw it in the Enterprise.