The recycled pallet market has suffered one of the worst core shortages in history over the last 16 months or so. At the same time, the pool of existing 48×40 pallets is getting older and more beat up. This has led many to wonder about how the market will react to the new normal. There are a number of options, and a mixture of all of these solutions may be the result.
Options include buying more new pallets, switching to a private rental pool, developing an internal pool and managing it, using more combination pallets, or paying more for used pallets.
A recent survey by Peerless Research Group, which publishes Modern Materials Handling magazine, asked pallet users about the core shortage. This survey seeks input from a wide variety of pallet users, including those who ship into the major retailers as well as industrial and non 48×40 markets. The Peerless survey asked, “As a result of having problems regarding procurement of used wood pallets, which options have you evaluated or likely to consider?”
Interestingly, only 5% said that they planned to rent pallets from a pallet pool such as CHEP, PECO and iGPS, etc. The majority of respondents claimed that they would purchase more new pallets to solve any core shortage that developed. Talk is cheap. But if this trend were to truly develop, it would be good news for both new pallet manufacturers and recyclers.
New pallet manufacturers would benefit by increased sales and business opportunities. Recyclers would benefit by an injection of more, better quality pallets into the existing white-wood pool. Of course, this assumes that the new pallets are built to a decent quality standard. The big problem is that Costco used to drive the quality specification for much of the new white-wood 48×40 pallet pool. And many of those customers have switched to rental. As a result, many of the new pallets entering the pool are not up to the quality that they once were.
Another interesting fact is that 22% of respondents claimed that they plan to create and manage their own pool of pallets. This could be a good business opportunity for pallet manufacturers and recyclers to work together to help customers manage private pools. And 26% said they would deploy an alternative strategy of some sort.
Now, you do have to be careful drawing too many inferences from the Peerless survey. Executive editor of Modern Materials Handling, Bob Trebilcock, said that less than a quarter of the total respondents answered the question about responses to the pallet core shortage. Also, many of the respondents do not use 48×40 pallets, and as a result, they would not be targets for traditional pallet pooling. However, the research does suggest that pallet users are open to buying pallets if the supply of used pallets worsens.
