Global Industry Leaders Discuss Pest Issue & International Standards

Leaders from the international pallet community recently gathered in Washington D.C. for a meeting of the World Pallet Council to discuss issues facing the global pallet and packaging industry. Founded in 1994, the World Pallet Council consists of trade association executives and other pallet leaders from around the world. The National Wooden Pallet & Container Association (NWPCA), the Canadian Wooden Pallet & Container Association (CWPCA) and Federation Europpene des Fabricants de Pallettes (FEFPEB) sponsored the meeting.

Pacific Rim countries played a more active role than ever before. China, Japan and the Ukraine participated in the World Pallet Council for the first time. According to Bruce Scholnick, president and CEO of the NWPCA, the objectives of the council are to be advanced through association leadership. The council adopted a mission statement focused on assuring wooden pallets and packaging remain a critical component of the evolving worldwide distribution system. Interestingly, the World Pallet Council appears to advocate wood over other alternatives even though plastic continues to gain ground in some markets, especially in Asian countries.

Representatives from each country reported on current market size, conditions and issues. These summaries provide a general understanding of global markets.

In general, Asian countries tend to use a higher percentage of plastic pallets than other parts of the world. According to Mitsuru Fujii, Japan’s representative to the council, plastic pallet usage in Japan has increased significantly over the past couple of years. Japan produced 54 million pallets in 2000 with 75.4% of its production being wood compared to 9.9% plastic and 5.1% metal. Japan uses a 1100 x1100mm standard and is aggressively pushing it on other Asian countries, especially China. The 1100x1100mm size makes up 68% of the Japanese market. In 2000, Japan had 11 million rental pallets in use.

Great Britain faces challenges caused by the differences in exchange rate between its currency and the Euro, the common currency of the European Union. According to Stan Bowes, president of the European Pallet Association (EPAL), the British pound is over valued, which leads to surplus capacity and lower prices. This translates into lower margins, less control and more cheating on specifications. Great Britain has only a handful of sophisticated, large players. But more and more smaller companies are starting to pop up due to extremely high fuel prices, which adversely affects large manufacturers having to ship over long distances. Great Britain currently has some of the highest fuel prices in the industrialized world.

Korea

Korea produces 50 million pallets per year. Currently, 60% of the market is wood compared to 40% for plastic. Increasingly, Korea is approaching a 50/50 split between wood and plastic pallets.

The United States’ neighbor to the north has rebounded from 2000 problems. Currently, 65% of its pallets are made from softwood while 35% of its pallets are made from hardwood lumber. Gordon Hughes, executive general manager of the CWPCA, said, “Recycling has recovered quicker than pallet manufacturing in Canada.”

Sweden, a heavily forested country, continues to rely primarily on wood not plastic for its pallets.

Although the largest market in the world, many of China’s goods remain unpalletized. China does not have an extensive distribution center network. Most of China, except for the few large cities, remains an agrarian economy. China produces 100 million pallets per year. Half of its production is used for export.

There is virtually no viable repair industry in China. Although some repairs are done by mom and pop shops with little mechanization, most pallets are used and thrown away. China wants to establish a national association and explore options to setup some kind of recycling program. According to the Chinese delegation, China has imposed a logging ban due to environmental concerns. Most of the lumber used for Chinese pallets is imported from Indonesia, Australia, and South America. Currently, China has no import duty on wood.

There are many little pallet manufacturers in the countryside. However, there are only 10-20 big players in the entire country.

The most pressing issue discussed at the World Pallet Council was the international phytosanitary concern for wood packaging. David Lamb of the U.S. Department of Agriculture pointed out that the IPPC standard is not mandatory and a number of countries may never implement it. Gordon of the CWPCA said that if North American producers do not take this seriously, Europe does. Fourteen Canadian shipments and 75 U.S shipments were stopped due to concern over the pinewood nematode. These shipments were sent back, treated or possibly even destroyed.

China became a topic of discussion because it has called for imports from Europe to comply with the IPPC standard by 90 days. China requires phytosanitary certificates beyond the marking system, and it wants bark free packaging, which is more severe than the IPPC standard. China is not a member of the IPPC.

China is not alone in calling for wood packaging to be bark free. The Electronics Industry Pallet Standard Task Group requires all pallets to be IPPC certified and be bark free.

Many of the representatives voiced the opinion that packaging users, especially large multinational corporations, would drive the implementation of phytosanitary standards. One example given to illustrate this point was a major electronics manufacturer that shipped a valuable load on a green softwood pallet. The shipment was held up at the border and was not allowed to be unloaded due to the pest concern. The purchasing agent bought a green pallet out of ignorance but said this would never happen again after the fiasco. Thus, companies are starting to wise up when it comes to the phytosanitary issue.

Indeed, major corporations do not want their shipments held up at borders. However, even companies as large as Chrysler have shied away from treating pallets until forced to because of the additional cost. In the end, most companies want a mark; they are not really concerned about plant health.

Gunilla Beyer of the Swedish Packaging Association said that some companies are concerned about using wood in packaging and may prefer alternatives.

“Treatment may save our industry,” said Fons Ceelaert, secretary general of FEFPEB. He went on to say that Europe will likely require both export and domestic packaging to be certified and marked in the future. Once concern raised is the lack of treatment capacity in some countries. Thus, it may be difficult for some countries to comply depending on when countries start to adopt and strictly enforce the IPPC standard.

Some areas of the world and segments of the industry are not as well positioned to comply with certification hurdles. For instance, certification has become a way of life for many European pallet manufacturers. Many of these companies are ISO certified; whereas only a handful of the largest players are ISO certified in North America. Thus, the certification is more of a way of life for European companies. Recyclers may be stretched as they will have to spend more on capital equipment than they have ever had to in the past. Also, recyclers are less likely to have any certification experience even in countries where things like ISO certification is more in vogue.

After the phytosanitary issue, discussion turned to a less conclusive topic – international size standards. Dr. Mark White of the Sardo Pallet Lab at Virginia Tech presented data on research measuring space utilization for various pallet sizes. Interestingly, the standard 48×40 design rated the best utilization rates when freight container and air cargo situations were averaged together. Discussion died down as many council members decided not to weigh in on the size standards issue. Size standards tend to be a regional or national concern. Any effort to push one size will likely meet resistance from supporters of other sizes. Yet, more than one country representative echoed the comment that size standards are meaningless if countries do not use them. Thus, it will likely be several years before any major decision is reached on this issue.

When it came to how often the council should meet, opinions differed from every year to every two years. Some representatives expressed concern about the possibility of poor attendance if the meetings were held every year. The council did agree to use the Internet to keep a constant lane of communication open. The NWPCA offered to develop and run a special Web site and chat room for the council.

Although the council meeting helped to foster improved understand of various issues facing each country, there remains a significant amount of uncertainty on key issues. When will developed countries begin enforcing the IPPC standard, especially those in Europe? Will the council recommend size standards? How can the council improve the image of wood packaging? Indeed, the very strength of the council seems uncertain. Will other major countries join and support its endeavors?

Very much in its infancy, the council provides a much needed dialogue on issues facing the pallet industry. Increasingly, companies are growing beyond the borders of one country or region. Large multinational corporations want global solutions, and the World Pallet Council can play a crucial role in helping the wood pallet industry retain its pivotal role in the supply chain. However, the council lacks any real formal structure or bylaws. Some participants even squabbled behind the scenes over who was invited to participate. Thus, the council must work through these issues and continue to dialogue as industry leaders seek solutions to global challenges.