The recycled pallet market has fallen back to earth after a period of historic price escalation in 2021 and 2022.
The pandemic created never-before-seen conditions in the U.S. pallet market. Demand escalated at the same time that retailers kept more pallets and released less back into the market. At the same time, CHEP suffered similar constraints, which led the rental giant to reduce deliveries to customers, especially seasonal agriculture customers.
These accounts then flooded into the white-wood market looking for assistance at a time when pallet recyclers struggled to service existing clients. Higher wood costs led new pallet users to look for recycled solutions where possible. During the pandemic, white-wood cores fetched anywhere from $4.75 at the bottom to $9.95 or more at the top depending on the region.
Now, less than two years later, the market has completely turned. Some pallet recyclers are so full that they have stopped receiving incoming cores. Some are only taking quality mixed loads. Junk pallets are hard to sell. Cores range from $3 to free, depending on the area and the current inventory of the recycler.
It's amazing how the market has changed so much in a year or so. Core emitters are discovering that what they thought would be worth good money is hard to sell. Some accounts are giving away pallets to recyclers just to keep them moving and to clear up space in their facilities.
The lesson is that markets can change quickly. Recyclers who sold out to conglomerates over the last two years “got out while the getting was good,” when their inventories were worth a lot more than today. Big players that were flush with cores led the downward trend for the market. They dumped pallets on the market to get cash while they could. But it didn’t take long for everyone to follow their lead.
Good, used, quality pallets remain desirable, just not at the prices they were two years ago. Prices have dropped back to reasonable levels, if not cheap prices, especially for #2s. As a result, core acquisition costs are low. But the bad news is that the cost of labor, insurance, automation and many other inputs remains high.
Pallet users need to remember the suppliers who rescued them during the pandemic. Good relationships are still important because the pendulum will swing back in favor of suppliers one day, just maybe not to the extent that it did a few years ago.
During the pandemic, the goal was to get cores at all cost. Now, the focus seems to be on getting the best cores at a reasonable price and managing inventories well. Recyclers are going back to fundamentals, and those who recently entered the market are discovering old norms that existed before the pandemic.
A recycler in Southern California recently said, “Everyone is talking about worrying about a recession. But for pallet recyclers, the recession is already here. Nobody is buying. Our yards are full, and the economy is in bad shape.”
Who will survive this latest downturn? It’s the companies that manage their inventories well, develop better people, remove waste and improve operational efficiency. That's why the Pallet Enterprise exists. Keep on reading and improving.
