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Market Update: A Great Idea That Never Materialized, Food for Thought for Today’s Market
Pallet market analyst, Jeff McBee, talks about the transitions in pallet recycling through the years and the need for machinery innovation to address changing landscape.
By Jeff McBee
Date Posted: 3/1/2012
I originally planned to write a multi-subject piece here as I have done in the past, using bloggish type shorter ideas. The first part I planned to write on some of the facts on the economy that would clarify some of the facts (wink, wink) that have been circulating. My planned working title was, “Why I Sometimes Yell at My TV” and I was going to focus on the State of the Union address and Obama’s new budget. Obama was late with the budget and I don’t know why he bothers, the Senate hasn’t passed a budget in over 1,000 days (thank you Honorable Harry Reid). Sorry… I was sidetracked.
My subject matter changed as I was riding down the road reminiscing and thinking about the changes in the pallet industry. My mind wandered to the struggles of the machinery industry. If there is a sector of the forest products industry that has felt the pinch more than the rest of us, it is easily the machinery manufacturers.
Time flies when you’re covered up. It seems like yesterday, but it’s been 20 years. I started during the perfect storm of 1992. The softwood market was extremely volatile, but it was nothing compared to the low-grade hardwood market. Everything that could drive low-grade hardwood prices was in play. Constant rains had limited supply. Demand was very high and the result was skyrocketing low-grade hardwood prices such as the industry had never seen.
At that very time, the recycled pallet industry was coming of age. Recyclers had their own association, the International Association of Pallet Recyclers (IAPR). Consolidation soon followed with groups such as PalletPallet and Pallet Recycling Associates of North America (PRANA). Recyclers were experiencing tremendous growth – at least partially as a result of the soaring lumber prices and pallet prices that were following.
The rise in pallet prices was advancing at such a pace that it opened doors for the recycled pallet industry. Buyers who previously would have never considered shipping on a recycled pallet were suddenly open to the idea. The growth in the world of pallet recycling at that time was simply remarkable.
When I first started covering the pallet industry, there was a man named Jeff Dietrich who would call our office from time to time. He was an interesting guy, with an interesting idea. He claimed to have a machine or device that completely removed nails from pallets.
Jeff said any company interested in the process was welcome to take a look at his invention in advance as long as they signed non-disclosure/non-compete agreements. There were at least two companies who stepped forward and looked into it, but nothing ever happened.
The rumor at the time was that the device used microwave technology to heat and cleanly “vibrate” nails out of the wood. This was prior to the widespread use of band saw dismantlers, so the promise of not destroying wood alone was appealing. Rotary disc style dismantlers were the primary dismantler of the day. They offered high speed disassembly, but lost plenty of wood to breakage. Band saw dismantlers offered far higher recovery rates but were not able to process the same volume of units.
The rumored prototype machine offered a best of both worlds dismantler. It allegedly was as fast as – if not faster than – a rotary disc, while providing the high recovery rates of a band saw. The two market obstacles – according to some who had seen it – were cost and soot. That seems logical as the heating/vibrating of the wood would char the nail holes. Still, that aspect would be a minor hurdle for the promise of high speed disassembly and complete wood recovery.
The biggest problem of selling the concept at that time – as I see it – was that it didn’t fit the market demand of that day. It was a design ahead of its time. Pallet recyclers of the early 90s were not necessarily interested in any extra wood above what they were already generating. Used pallets were abundant. There were no concerns about having plenty of wood or cores. In fact, some in the industry were still being weaned off of being paid to haul away pallets.
Here we are 20 years later and the microwave dream machine seems like a perfect fit for the industry. It doesn’t need to be that particular machine, but similar results could pay huge dividends. While pallet recyclers of 1992 had a different mindset, the recycler of 2012 is looking at remanufactured or “new life” pallets, combo pallets with new stringers and recycled decking, odd sized units and any other angle in the current market. The proliferation of pallet leasing has cut a large swath out of the 48x40 market that once seemed boundless but has now become a difficult business climate.
To the pessimists, the idea of a high-speed/high-recovery dismantler may seem pie in the sky thinking. To the optimists, it is likely to appear an overdue idea. To the machinery manufacturers serving the pallet industry, it has to be music to their ears. As I said earlier, if there is a sector of the forest products industry that has felt the pinch more than the rest, it is easily the machinery manufacturers.
I’m not saying that Dietrich’s machine was the ultimate device, but right now a better mousetrap may be just what everyone needs.
(Editor’s Note: Jeff McBee is an analyst who researches and writes about the pallet industry and its raw material markets for Pallet Profile Weekly and the Recycle Record, the only newsletters dedicated to serving the pallet industry. For information on subscribing to Pallet Profile Weekly or the Recycle Record, call 800-805-0263 and ask for Jeff.)