I wasn’t in grocery distribution for long before I grasped the importance of block pallets. In the 1980s, we operated on 48×40 stringer pallets, as was the norm in the Canadian grocery industry at the time. But Kraft Foods, a major supplier, shipped merchandise to us on proprietary block pallets. I was the rookie supervisor responsible for making sure those block pallets were returned to Kraft after being emptied, but there was just one problem.
The warehouse loaders used to stash them! They coveted block pallets highly for shipping, and the ability to turn them to load more on a trailer. Kraft eventually phased out its pool – maybe too many retailers like us were hanging onto them. Then we had to start buying our own block pallets for downstream distribution.
First invented by the military during World War II, it was the launch of CHEP’s Mark 55 in May 1992 that truly brought block pallets into the U.S. mainstream. Fast forward almost three decades and block pallets still hold a minority position in the overall North American market. But they have become common and are preferred in the U.S. grocery sector. Block pallets are growing at a faster rate in the country than stringer, and this trend is significantly fueled by the growth of CHEP and PECO rental programs.
As the rental providers have been stretched this year, the availability of block pallets has become a major concern. Many block pallet users have started calling white-wood companies seeking supply. Given this increased current interest, Pallet Enterprise felt it would be a useful time to review the block pallet market and production requirements.
This first installment provides an international market overview. The next article will look at the practicalities and challenges of block pallet production. This article touches briefly on the history of block pallets, looks at international market share, and finally explores the impact of block pallets in the North American market.
The Emergence Of The Block Pallet Helped Improve Storage Density
In North America, block pallets are sometimes looked at as a newer innovation. In fact, the block pallet was invented during World War II, driven by the need to maximize payload in cramped warehouses as well as in the holds of ships. Unlike the stringer pallet, the block pallet allowed full forklift entry from all four sides, enabling greater handling flexibility and ultimately, better storage utilization.
There were two separate patents filed for block pallets in 1943, and not surprisingly, both were by U.S. military officers. Norman Cahners, an officer at the Navy’s Hingham Massachusetts material handling laboratory, is generally recognized as the inventor of the 4-way pallet. In December of that year, Milton O. Boone, a Quartermaster Corps officer based across the county in Oakland California, also filed a block pallet patent.
Full four-way entry was an important breakthrough, and the Hingham lab even referred to eight-way entry, being the ability to enter a pallet from all four sides as well as all four corners. After the end of hostilities, pallet usage began to take root in commerce, although Europe and North America would go in different directions regarding preference for block versus stringer.
The European Market
After World War II, the block pallet emerged as a popular choice in Europe. According to FEFPEB (European Federation of Wooden Pallet and Packaging Manufacturers), Europe today has an estimated 4 billion pallets in circulation. Block pallets accounted for 68% of production from a nine-country sample in 2019, while stringer (2-way) pallets accounted for 16% and “other” pallets also at 16%.
That 68% share includes the following block pallet segments: 21% EUR/EPAL, 10% 4-way CP (chemical) pallets, 10% closed pools (including rental pools), and 27% customer-specific 4-way. EPAL (European Pallet Association) reported the production of 97.3 million units in 2020. The CP pallet pool is used in the plastics and chemical sector. It was established in 1991 by the VCI (Verband der Chemischer Industry) in Germany. Pool oversight subsequently passed to the APME (Association of Plastics Manufacturers in Europe), now Plastics Europe. Over the last few years, the European Pallet Association (EPAL) has also expanded its pallet range to include quality-assured EPAL CP pallets.
More Composite Block Usage, Higher Percentage Of Block Pallets Projected For Europe
According to Michaël Modugno, vice president and founder of PGS, a major pallet company based in France, composite blocks are becoming increasingly popular. “The trend before COVID was already to use more and more composite, and now because of the sharp price increase of timber, the trend is accelerating even faster,” he said. “I don’t have any official statistics, but I would guess that at least 80% of EPAL (pallets) are made with composite blocks.”
He cited the benefits of composite blocks, including a market for recycled fiber, cheaper price point, easier to use in robotic assembly, and no further processing of material required at the pallet manufacturer. One of the major European pallet rental companies switched away from composite because one major customer experienced some block swelling. “But they are the only one to do so,” he continued. He noted that other poolers are pushing toward composite as they get a better price, and in the end, he believes they are more durable.
He stated that there are now one or two major composite block producers in every European country. While the competition is intense, demand is increasing.
According to Patrice Chanrion, a French consultant, around 45% of companies in that country regularly use pressed blocks and between 8.7 and 11.3 million new pallets are produced with composite blocks – or about 20% of annual production. “Feedback from pallet producers and reconditioners, as well as users, suggests that these figures should change rapidly, with significant growth in France,” he said.
While the choice of composite blocks is on the rise, Modugno additionally believes that the block pallet share of the European pallet market will continue to grow. He identified the construction sector as a major market for stringer pallets. “Construction is looking for strong, cheap, single-use pallets,” he said. “Only stringer pallets match that expectation.” Because of environmental pressure, however, major building products companies are moving to reuse programs with custom block pallets. As a result, he believes that the proportion of stringer pallets will decrease significantly in Europe in the years ahead.
Asia Pacific
When it comes to Asia Pacific, there are some countries that are predominantly using stringer pallets, including mature pallet markets such as Australia and Japan, while others lean toward block design. Toshifumi Okabe, a Japanese industry veteran, attributes that country’s history with stringer pallets to the limited usage of pallet jacks for handling less complexity during pallet manufacturing and recycling versus plastic pallets. And as material handling systems evolved over time, he noted that particularly in the case of plastic, stringer pallets provided greater stiffness that was critical for automated systems.
In less mature pallet markets, such as India and China, pools such as CHEP, Loscam, and EPAL have promoted block pallet usage as they have begun operations in these countries.
According to Freedonia, the Asia Pacific region passed North America to become the world’s largest regional pallet market in 2019 and is anticipated to account for 40% of global pallet output in 2024. In terms of production, India and China are expected to be the world’s two fastest-growing national markets. Other Southeast Asian nations including Indonesia and others are also anticipated to achieve strong gains. Given that these newer markets are embracing the 1200×1000 block pallet as a standard pallet, one might expect that overall, the percentage of block pallets will continue to climb. Freedonia reports that China is expected to surpass the United States as the largest national pallet producer in 2024.
North America
The Americas, in general, has been predominantly a stringer pallet market, although block pallets have traditionally been used in some industries such as metal can production, beer, paper and chemical. As mentioned at the top of this piece, the U.S. launch of CHEP’s block pallet in 1992 brought block pallets into the spotlight. The subsequent growth of CHEP and PECO has helped to boost block pallet production. Retailer pallet requirements for CHEP/PECO as well as for block pallets by Costco, starting in 2011, have helped support block pallet growth.
According to research published in 2020, there were 513 million wood pallets manufactured in the U.S. in 2016. Block pallets accounted for 21% of production, more than double the percentage they enjoyed in 2011. Stringer pallet production in 2016 was at its lowest percentage since 1999. Anecdotally, a few pallet industry veterans interviewed for this article believe that block pallet share will continue to grow.
Herwood Certified to Trade and Repair EPAL Pallets
While grocery industry rental and CP pallets have driven much of the block pallet growth, there are other opportunities as well. Herwood Inc. of Windsor, Quebec recently has been approved an EPAL licensee. According to Jason Wheeler, Herwood president, the company has become the only authorized EPAL provider in Canada, and along with a licensee in Virginia, one of only two authorized providers in North America.
Herwood’s move to become a licensee is in response to the increased demand for EPAL pallets by customers. This is especially true for food industry customers in the maple and dairy products sectors. Jason Wheeler of Herwood observes that the increased demand is likely related to changes such as the enactment of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), Brexit, and more stringent requirements by European customers for EPAL pallets only versus other types of europallets and knockoffs.
Herwood is licensed for the repair and trading of EPAL pallets. It is authorized to import them and resell them to meet the needs of the Canadian market. Wheeler notes that there are not enough used EPAL pallets coming free to meet current and projected market demand, necessitating importation from Europe.
The company is currently waiting for the arrival of EPAL-certified nails so it can begin authorized repair. It placed orders from nail suppliers in Turkey and China in March and, as of July, was still waiting for delivery. Meanwhile, the company continues to build an inventory of damaged EPAL pallets that it will be able to process.
The company also makes custom pallets for another customer on a customized nailer and noted that composite block availability has been tight from European suppliers and is currently looking at timber blocks as an option. Wheeler has also begun buying blocks from Ohio-based Litco International.
Litco To Expand Production And Offer New Sizes
Litco added a building to its Dover, Ohio plant in 2019 that will eventually accommodate four block extrusion lines. The company added its first line and three die sizes and took over a year to get it running properly with the wood and resin mix. “We began to produce and fill orders in the 4th quarter of 2020,” explained Gary Sharon, vice-president of Litco.
A few months ago, the company ordered a second extruding line and two additional die sizes. The equipment has arrived at the plant and will begin production in the 4th quarter of 2021. The predominant market for its blocks is for export, as North American pallet rental companies use timber blocks.
Meanwhile the company has also begun a building expansion at its Sardis, Mississippi plant and intends to replicate what it is doing in Ohio, with a goal of having two lines producing in January 2022. “This location gets us closer to the Gulf of Mexico to attract domestic and CP block pallet demand,” Sharon stated. “I believe that more users will come forward as we produce more blocks and get them into the market. This is provided that wood supply stays limited, and prices remain higher.”
In summary, block pallet usage continues to grow incrementally in international markets such as North America and Europe. Block pallets are expected to grow much more rapidly in countries such as China and India. Meanwhile, the use of composite blocks continues to gain popularity while providing an attractive opportunity to utilize fiber and promote automated assembly. In the next installment, we’ll further discuss block pallet design, production and repair.
European Pallet Market 2019 (FEFPEB)
Block pallets 68%
Stringer pallets 16%
Other pallets 16%
Total 100%
Block Pallet Segments
EUR/EPAL pallets 21%
CP pallets 10%
Closed pool 10%
Customer-specific 27%
Total 68%
Source: FEFPEB
