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Letter from Ed: Pallet Industry Lumber Markets Undergoing Changes – Covered by the Pallet Profile and Recycle Record
Pallet Enterprise president requests readers to participate in softwood lumber pricing survey to possibly add pricing east of the Rockies in Pallet Profile market report.
By Edward C. Brindley, Jr
Date Posted: 2/1/2017
Since I started writing about the wooden pallet market in 1977, changes in the resources and lumbers used by the pallet industry have been more extreme that one would have expected back then. In the 70s and 80s most pallets east of the Rockies were made from low-grade hardwoods, although some softwoods were used. Softwoods were more common in Canada, but quite a bit of hardwood was used in eastern Canada. West of the plain states and Rockies, most pallets were built from softwoods from both U.S. and western Canadian sawmills.
Into and through the 80s changes were minimal. During the 80s, recycled hardwood pallets moved into the arena from their limited earlier position. Throughout the 90s recycling blossomed with annual growth rates of about 20%. Pallet growth continued to expand with the lion’s share of expansion being recycled pallets. CHEP rental pallets had already been active in Canada, and they exploded in the United States once they emerged on the scene. The CHEP rental pallet started with a stringer pallet, probably because stringer pallets had been the dominate style of pallet used in North America. To be more consistent with CHEP pallets in Europe and some other parts of the world, CHEP shifted its specification to softwood block pallets as it gained significant market share in the grocery and consumer goods industries.
During the first decade of the 21st century, not too many significant changes were made in the pallet styles and material choices. Recycling growth continued, and pallet cores, the used pallet raw material in the recycling industry, were typically tight in supply. The Pallet Profile Weekly became the best known report that carried low-grade lumber prices for the hardwoods and western softwoods used in pallet construction. It was the only lumber industry market report that carried both hardwood and softwood low-grade lumber prices. During this decade Industrial Reporting added the Recycle Record, the only market report for the used wooden pallet market, to its Pallet Profile publication. Industrial Reporting had been known for its Pallet Enterprise magazine since the early part of the 1980s.
The Enterprise had become one of the most highly respected trade magazines in the lumber products industries, and the Pallet Profile continued to expand its editorial coverage. Few market reports in either the hardwood or softwood lumber industries are as respected for their editorial coverage as is the Pallet Profile. Many pallet industry readers look to their Pallet Profile reports as their respected weekly news coverage in the pallet industry.
Going into the second decade of the 21st century, the low-grade hardwood industry continued its growth. The railroad tie industry stayed strong and stable with an often gradual increase in demand for crossties. The most common tie had changed from a 6x8 tie to a 7x9 tie which requires more hardwood fiber. The board road and crane mat industries grew from their earlier years to a major competitor to hardwood pallets. While the pallet industry continued to be the biggest user of low-grade hardwoods, its many competing industries were all strong as we moved through the early part of the second decade of the 21st century. All of these competing industries were in a position to be able to pay more for their hardwood lumber needs than the pallet industry could. Going into the 2013-2014 period, a shortage of used pallets developed and the supply of pallet cores became as limited as the industry had ever seen. So, used pallets were not in a position to fill more of the demand for hardwood pallets.
Early in the second decade of the century Cosco moved to a softwood heavy-duty block pallet instead of the 48x40 stringer style that had been so often used. This pallet is similar to the CHEP and PECO softwood block rental pallets. The market was definitely changing. While the conversion to this softwood block pallet did not come around as quickly as many suspected it would, changes in the pallet world were definitely in the environment.
It seemed that almost over-night there was not enough low-grade hardwood east of the Rockies and plane states to handle the needs of the hardwood pallet industry. All of the other industries that use low-grade hardwood were busy at the same time. While the pallet demand was not hot, it was continuing to recover from the recession that started in 2008. When pallet manufacturers were not able to stage enough hardwood lumber, they turned to softwoods to build pallets for some of their customers. Now that competing hardwood lumber using industries are no longer requiring the high quantities of lumber they were, the pallet industry is no longer struggling to get enough hardwood lumber. Low-grade hardwood cants, boards, and dimension lumber is available at much lower prices as prices fell throughout 2015 and 2016. At the same time the prices for southern yellow pine from the Southeast, spruce-pine-fir from Canada, and West Coast softwood have gone higher. Many of them are at the highest prices they have ever witnessed.
Yes, the pallet lumber markets have definitely been in transition. With softwood prices going higher and hardwood prices going lower, softwoods no longer have the price advantage over hardwoods that they did have. Pallet using companies often are avoiding switching from softwoods back to hardwoods. It is not all price. Softwoods often look better to the pallet user. A big advantage that softwoods have is that they do not mold the way hardwoods so often do. While mold is not a new phenomenon, it is a big issue today to pallet users, one they want to avoid. At one time most pallet users thought that hardwoods meant a stronger and longer lasting pallet. They often thought of hardwoods as being strong and softwoods as being weak. When they were willing to give softwoods a try during the severe hardwood shortage, most pallet users found that to their surprise the softwoods were strong enough to do the job and do it well.
The bottom line is that more softwoods appear to be here to stay unless some sever market changes take place. So, the Pallet Profile is planning to add #3 and #4 2x4 and 2x6 RL SYP prices to the southern part of our report, hopefully in March or certainly no later than April. In the northern states, we want to add #3 and #4 2x4 and 2x6 RL SPF as soon after that as we can gather enough information. This will make the Pallet Profile a complete report for wooden pallets in North America – both low-grade hardwoods and low-grade softwoods.
I am asking readers to complete the brief softwood survey below so that we can better serve you and the industry. Your input is the best way to ensure that the market report remains valuable and is able to add softwood lumber east of the Rockies. Our guarantee is that we will keep your information confidential and will only report aggregate information to the public.
Many times Profile subscribers have told me that we publish the best publication in the pallet industry, and it is not the Pallet Enterprise. They consider the Pallet Profile to be the most important publication. But we need your cooperation in providing some valuable accurate lumber prices to make our market coverage as accurate as possible.
I offer a special thanks to every reader who participates in our softwood lumber expansion. Working together we can build a stronger industry. Sincerely, your publisher in the pallet industry.
Dr. Ed Brindley, President, Industrial Reporting, Inc.
Download a pdf file of the survey at: www.palletenterprise.com/softwoodsurvey.pdf
or fill out the online survey at: www.palletenterprise.com/softwoodsurvey.