U.S.-Canadian Group Visits Russian, European Sawmills and Pallet Plants

A group of U.S. and Canadian pallet company businessmen and their spouses toured a number of European sawmill and pallet plants. Last summer’s tour, which also drew participants from Australia and New Zealand, was organized and sponsored by the Canadian Wood Pallet & Container Association-ACMPC. The tour combined visits to pallet and sawmill businesses with sight-seeing in a number of European countries.

            The tour group rendezvoused in Stockholm, Sweden and then flew to St. Petersburg, Russia for a three-day stay. The group immediately traveled by bus to its first stop, PSB-GEM-HOLZ, a softwood sawmill business. Along the way, a Russian guide described life in St. Petersburg and changes since the collapse of communism. There are signs of budding free enterprise in Russia. For example, farmers and other small entrepreneurs set up stalls to sell produce, processed meats, baked goods and other goods – activities that were prohibited under the former communist government.

            Russia’s manufacturing base, for decades heavily tied to government, remains very weak. Russia’s currency is very weak, too, and the country depends heavily on foreigners for capital investment. It seems everything is for sale. Boris Strogiy and his son, Nikita, who own and operate PSB-GEM-HOLZ, also are looking for business partners to expand.

            Boris and Nikita met the group, and everyone shook hands and made introductions. Nikita boarded the bus and took the group on a tour of the mill yard.

            The company obtains logs from its own wood lots, contracting with loggers to do the cutting. The size of wood lots available in Russia is determined only by a company’s ability to harvest the logs for market, according to Nikita.

            The mill makes softwood lumber and pallet stock. In fact, PSB-GEM-HOLZ supplies cut stock used for CHEP pallets.

            Birch, aspen and poplar logs are sold to a Finnish paper company. Birch trees average about 20 inches in diameter, and poplar and aspen are almost as large. Hardwood logs have little or no value in Russia, according to Nikita, because there is no local or European market for hardwood lumber or cants.

            The sawmill originally began as a cooperative Russian-German effort, but the Strogiy family now is the sole owner. It is equipped with European-made wood processing machinery. The mill, with about 50 employees, manufactures lumber that is destined for many ports in Western Europe, including Germany, Sweden, England, Spain, Belgium and Portugal.

            Boris hosted the visitors to a light lunch in the offices and answered questions. The company’s workers earn an average of $400 (U.S.) per month, he said. The mill’s pre-cut pallet stock sells for about 110 Euros per cubic meter – dockside in St. Petersburg.

            Many in the group expressed surprise at the company’s low prices, but Boris said they are very new to the lumber industry. “Russia has been asleep for over 70 years and has only been awake for 12 years,” he said, referring to the collapse of communism and the resulting changes in Russian life. “Give us some time.”

            Many Russian sawmills ship pre-cut pallet stock to customers as far away as 5,000 kilometers (about 3,000 miles) in Western Europe, according to Boris. Lumber is trucked non-stop on over-size or twin trailers. The lumber is sold for little more than the cost of trucking. However, the companies buy consumer goods in Western Europe and haul them back to Russia to sell to retailers for a significant profit.

            Following the visit to PSB-GEM-HOLZ, the group enjoyed a tour of St. Petersburg on the way to its hotel. St. Petersburg was — and still may be — Russia’s largest port and functions as the closest port to the West. This port has serviced ocean-going ships from around the world throughout its long history. Strangely, however, the port is at a virtual standstill today.

            The following day the group enjoyed a tour of another sector of the city and a hydrofoil ride on the Neva River to the entrance of the harbor. The group also visited the summer home of Peter the Great and the Hermitage Museum, a world renowned art museum. That night they dined with the Strogiy family at a traditional St. Petersburg restaurant, enjoying Russian cuisine, wine and – of course – vodka.

            The group traveled by bus the next day to tour a palace that was built by Peter the Great for his second wife, Catherine, in the town of Pushkin and then flew back to Stockholm. In Sweden it was greeted by Jan and Ewa Fredell of Fredells Travaru AB. (Jan served as chairman of the board of directors of the National Wooden Pallet and Container Association in 2002.)

            The next day the group traveled by bus to tour Jan’s company. En route to the two-story complex, a videotape about the Fredell family business was played on the bus video system. The Fredell business has its roots as a sawmill, timber wholesale and pallet manufacturer. However, Jan expanded the company into the retail sector, and today the company includes a popular and successful home improvement retail store.

            The first floor contains wood processing and manufacturing operations, including automated lumber cut-up lines, manufacturing operations, dip tanks, inventory stock and more. The second floor is dedicated to retail sales and is stocked with merchandise that is similar to what would be found in a Home Depot or Builders Box in North America. The retail store, which has propelled the company forward, offers a one-stop source for homeowners and contractors buying supplies and material for renovations and residential building projects.

            The travelers left Sweden for a three-day excursion to Denmark, Holland and Belgium. In Holland the group stopped on the Dutch coast to tour PFK-Post Heinenoord, a pallet and container manufacturing business. Owner and president Rob van Hosel greeted the group and led it on a tour of his plant. The company was equipped with many different types of nailing equipment, and the yard was full of high quality pallets, boxes and crates. As is common with many European industrial facilities, the buildings were huge. For example, the building used for storing raw material was larger than many manufacturing centers in North America. The company buys high quality raw material and normally purchases it in large volumes to obtain a better price.

            PKF Post supplies various wooden boxes and containers to the Western European agriculture industry. It manufactures a type of veneer for the side and bottom panels. When the North American tour group was visiting, workers were busy assembling by hand large boxes that were in demand for the early apple harvest.

            The group traveled next to Belgium to visit and tour Pasec N.V., one of 13 companies associated with Faber Halbertsma Groep, perhaps the largest pallet and container manufacturer in the world. The visitors were met by Kase W.T. Faber, CEO of Faber Halbertsma Groep and the managing director of Pasec. Following a short history and introduction, the visitors were fitted with special head sets to enable them to ask questions during the tour. If someone had a question, the microphone was passed to him, and everyone heard the questions along with the answers from the tour leaders.

            The plant was very impressive. The array of nailing machines and other equipment was extraordinary. The majority of the company’s pallet production is block pallets. The company experienced increased demand for specialty stringer pallets, however, and added a machine to automatically nail them; some of the specialty stringer pallets are 8-10 feet long but nevertheless can be assembled automatically on the equipment. Faber Halbertsma Groep supplies Europe’s chemical industry with pool pallets that are used for shipping to the farthest regions of Europe. Pasec also has recycling operations to repair its pool pallets; the recycling operations are equipped with a bandsaw machine for removing damaged deckboards and blocks.

            The plant generates heat by burning scrap wood and pallets. Waste wood also is used to fuel dry kilns that heat-treat pallets, boxes and crates in order to meet global phytosanitary requirements.

            From Belgium, about half the tour group returned home and the remainder flew to Edinburgh, Scotland to attend the World Pallet Congress, a conference of the leading European and British pallet trade associations, FEFPEB and TIMCON. The FEFPEB-TIMCON conference brought together more than 200 leaders of the global pallet industry representing such  countries as European Union members, Scandinavia, Russia, Eastern Europe, Australia, New Zealand and North America.

            Neal Grimes of Pallet Resource of North Carolina suggested that Nikita and Anna Stoigiy of PSB-GEM-HOLZ attend the conference. To the group’s surprise and through the assistance of Jan Fredell, Nikita was invited to attend the World Pallet Congress as the representative from the Federation of Russian States.

            This conference provided a vision into the future challenges and potential solutions facing the international pallet-packaging industry. Many business problems were discussed in the seminar segment, both in group discussions and one-on-one. One of the biggest debates was over the dilemma caused by old pool pallets and the sectors that new pool pallet groups plan to explore.

Phytosanitary Requirements

            Delegates to the conference generally agreed that International Plant Protection Convention (IPPC) rule for solid wood packaging is permanent. As large industrial countries post their import and export policies for solid wood packaging, more countries will be required to comply with the rule.

            The regulatory program was designed to be paperless, and the European Union has tried to persuade China that all solid wood packaging destined for China will meet the rule and without the need for any formal documentation. All that will be required will be the official IPPC mark on two sides of the solid wood packaging.

            The wood packaging import and export policies of Canada and the U.S. are complete. They have been posted with the World Trade Organization and accepted. All solid wood packaging now is subject to these policies. Mexico, South Korea and Australia are expected to adopt policies in the future.

            The European Union, which is admitting a number of new members from Eastern Europe, including Estonia, Latvia, Lithuania, Poland, Slovakia and the Czech Republic, expects to make changes in its import-export policy in July.

Standardization

            North America and the European Union have the largest pools of standard pallets – the 48×40 in North America and the 800mmx1200mm Europallet. The Asian pallet pool is the next largest, and its pallet best meets the dimensions of international ocean cargo containers.

            Delegates concurred with the strategies of two of the world’s largest companies regarding pallet standardization. IBM plans to use only Euro-type block pallets (800mmx1200mm) and Wal-Mart will require only 48×40.

Other Issues

            There was some discussion of the pallet pools, and conferees looked forward to hearing remarks from the Faber Halbertsma Groep, IPAL and LPR Group. Delegates also agreed that the pallet and container industry must promote itself through trade shows and other means. Conferees discussed the use of wood pallets in the food services industry and the need for new or cleaned pallets in food service applications. Delegates indicated that fewer than 10% of pallets are made of competing materials; corrugated and plastic are the most common alternative materials, but plastic apparently has lagged somewhat because of price increases for petroleum.

The Next 5 Years

            Many delegates agreed that the pallet and container industry will be increasingly customer driven, and the industry will become part of the process. Cheating on pallet dimensions and construction will be taken more seriously, and pallet suppliers that engage in those kind of practices will find themselves out of the loop.

            Several delegates argued that the industry must take a bigger lead in directing pallet purchasing and design. Pallet professionals must lobby for participation on committees or boards that are involved in pallet design and purchasing.

            Pallet pools are expected to grow. Today there are an estimated 12 working pools. The number is projected to double in five years to 24.

            There will be more demand to develop pools for specialty industries, and pallet suppliers will be solicited to administer such pools. Responsibility will be high, and GPS tracking will be required.

            A number of the world’s largest pallet pools will become more focused on specific markets, leaving many smaller markets to smaller pools.

            Pools will continue to have problems with lost or roaming pallets. Pool operators must be able to hold the user or licensee responsible for pallet losses.

            Programmable Radio Frequency Identification (RFID) chips will be used to ‘read’ and track what is carried on a pallet.

            Pallet recycling is expected to increase in Europe. Delegates agreed that this aspect of the pallet industry must grow in order to make a positive environmental case for the use of wood pallets and packaging.

            The North American pallet recycling industry is expected to continue to grow at a high rate, too. It should continue to grow until the number of repairable cores falls to an unmanageable percentage and another huge influx of new pallets is required. Many believe this point is not far off, and that purchases of new pallets will soon increase.

            The British government has some regulatory issues with wooden pallets, and the country’s pallet industry may be forced to influence political direction.

            The next international pallet conference will be the sixth Interpal World Pallet Congress, which is scheduled Aug. 30-Sept. 2, 2005 in Victoria, British Columbia. The event will be hosted by the Canadian Wood Pallet & Container Association-ACMPC.