If there is one word to explain 2020, it is coronavirus. The global pandemic led to economic carnage not seen since the Great Depression. It began a period of global recession and shutdowns never imagined. And yet, the pallet industry is still here. And many pallet companies have reported strong sales, especially for the second half of the year.
As soon as COVID-19 started to spread around the country in March, pallet companies connected to consumer goods experienced a spike in demand. This was especially true for rental providers and anyone in the United States serving the fast-moving consumer goods supply chain. At almost the same time as governors began shutdowns, some other sectors ground to a halt affecting pallet companies more connected to heavy industries, service sectors, foodservice and more. Demand for groceries, cleaning and medical products skyrocketed, and pallets became crucial heroes in supply chains. The Trump administration listed pallets among its critical infrastructure business list as did states allowing pallet providers to remain open.
The year 2020 provides us a picture of what the next critical global catastrophe might look like. It is clear that pallets are critical for supply chain success and will likely be given special consideration when it comes to lockdowns, financial assistance and emergency regulations. There were some initial concerns as some governors talked about shutting down forest products facilities (such as sawmills), but most of those regulations were improved to recognize the importance of the entire wood packaging supply chain.
Pallet companies that did well in 2020 had a diverse base of customers and an ability to respond to changing operational requirements. Even though pallet companies in the United States could remain open, concerns about the coronavirus required businesses to take new steps when it came to cleaning, social distancing in the plant, work schedules, employee health screening, etc. From how employees took work breaks to training to sharing of workstations to work health precautions, pallet companies had to adapt. If you didn’t have the human resources and management expertise, you were going to lose workers and possibly customers.
The global pandemic also made a horrible labor shortage even worse in the pallet sector. If employees had family who tested positive for the virus, those workers had to quarantine for a period of time. Most pallet companies have limited management staff and machinery workers. If key operators or mangers get sick, pallet companies may have to idle capacity or reduce operations. The good news is that many pallet companies were able to keep running through the pandemic. Some even increased production to meet spiking demand from some customers. When the U.S. government passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), it gave a lifeline to hurting small businesses as well as unemployed workers. One consequence was the government significantly boosted unemployment benefits, which gave many Americans a financial incentive not to work. This forced companies to raise pay rates to attract workers, and in most cases pallet companies still were not able to find enough help as the economy came back to life this summer. Many people opted to avoid coronavirus exposure and receive as much or more in pay by simply staying home. Congress may extend unemployment bonus compensation with another round of stimulus being considered in December 2020.
Many companies in the service and other sectors that allow for remote working shifted to telework. Everyone became really familiar with Zoom and Microsoft Teams meetings. This led to an unexpected boom for the construction sector as people decided to upgrade their homes since more people were staying home from school and work. At the same time, mills across North America had reduced capacity, concerned about the economic impact of the virus. And they were suffering from staff losses due to the virus. Canadian mills had reduced exports to the United States due to tariff and general pricing concerns. These and other factors led to a perfect storm where softwood lumber prices soared to historic highs. Low-grade softwood became hard to get and prices rose significantly although not as much as grade material. Trucks shifted capacity to higher grades and construction-related markets, which reduced available truck capacity in some markets for pallet providers. Some pallet suppliers shifted customers to low-grade hardwood. The hardwood sector was already reeling after the effects of the trade war with China, reduction in Chinese demand for U.S. hardwoods and increased competition from alternative products in domestic flooring markets.
The COVID-19 pandemic demonstrated the resilience, importance and capabilities of pallet companies in North America. Investment funds continue to flow into the industry as both PECO Pallet and 48forty Solutions were acquired by new owners connected with private equity firms. The coronavirus just amplified all the trends going on in the industry from the importance of brokers to the growth of e-commerce to the difficult labor situation to complex fluctuations in the lumber markets. Smart pallet companies need to know their customers, be skilled at retaining employees, and be intuitive when it comes to raw material supply movements (lumber and cores). What lessons did you learn from COVID-19? Please share your thoughts online at the Pallet Enterprise LinkedIn page at https://www.linkedin.com/groups/8133689/.
