The recycled pallet market has lost its collective mind. Many of us are culpable, and I have decided that I am not going to play the game anymore. I am calling on other recyclers to do the same thing.
The U.S. recycled pallet market is broken… oh let me count the ways. Let’s start with pallet counts. Whether you are getting loads from other recyclers, brokers or CHEP, chances are that you are getting lots of junk in your loads. And increasingly people in the market are paying for it. Recyclers are desperate enough for stable core supply that they will pay for scrap. I have even seen bids that ask straight up, “What are you willing to pay for scrap?”
Others just build it into the price of the load. But if you are paying too much for the load, than you are really paying for this junk too. I have one supplier that says it is putting 520 pallets on a load, but when you take out all the broken ones, CHEP pallets or fake CHEP pallets, you are lucky if you get 400 GMAs on a load. These are increasingly of worse and worse quality, and yet others in the market are paying crazy prices for them.
All the while pallet rental companies are laughing at us because we are cannibalizing our market and driving up prices, which makes recycled pallets less cost competitive.
While brokers have a place in the market, some are bidding up cores to crazy prices in the hopes of cornering the market.
Getting loads from major rental companies with Total Pallet Management (TPM) operations is riskier than ever. I have seen loads coming from an actual CHEP facility with high amounts of junk on it, and the rental company expects us to pay for it all even though the counts are not always correct. I am wondering how much sortation is taking place because we are getting blue pallets on loads coming from CHEP-managed facilities. Some of these are fake CHEP, pallets that are painted blue but don’t meet CHEP standards and carry no CHEP logos. I was told by a CHEP representative that we have to pay for those even though they are junk to us. It seems that those pallets were painted by accident at CHEP depots. And there are a lot of them coming from some CHEP facilities.
Fake CHEP really only come from CHEP sources. The CHEP representative said, “Even if the pallet is blue and doesn’t have the CHEP logo, it isn’t a CHEP pallet anymore.”
That seems like a huge loophole or concern for a company with billions of dollars’ worth of pallet assets. Instead of push these pallets into the general pool, rental companies should be doing everything in their power to collect and destroy them because it creates confusion in the marketplace.
Some contend these pallets are painted various colors for customer display purposes. Whatever the reason, they are causing issues and confusion. Another issue with rental pallets in the market is RFQs from major pallet users that ask how much you will pay for CHEP pallets. These are non-participating distributors that want you pay for blue, red or other colored rental pallets. How is that legal? If I got caught selling CHEP-marked pallets, big blue would surely sue the hell out of me!
Many RFQs are asking for bids on standards that are far off what they are currently getting from pallet suppliers. But the customers don’t know what they are truly getting. Recyclers need to do a better job communicating common practices to customers.
So, now that I have identified the problems. What are the solutions? Simply put, recyclers have to stop paying for junk and insist on accurate counts. Otherwise, we are turning a blind eye to what amounts to industry accepted fraud as core suppliers are claiming one thing and delivering another. Maybe a solution is to video tape every load so that there is accurate surveillance of what is taking place.
The longer we keep on the current trend, the more the market will get out of alignment, which will only make rental pallets that more cost competitive. Recyclers and brokers must both work toward a proper balance.
We have decided to only pay for what we are getting. No more, just pay the full balance, and we will work it out on the next load. Forget that because “working it out” has not worked for us.
Editor’s Note: This column is the opinion of the author and does not represent any opinions held by the publisher. Larry would like to chat with like-minded recyclers who want to do something about this concern; you can email him at larry@jcpallet.com.
