Acquisition Shows Effect of High Lumber Prices on Pallet Industry

While there have been a number of articles about the effect of the lumber shortages on the housing market, much less has been said about how the national lumber shortage has affected other industries. For instance, a leading end use for lumber in the US is pallets. Indeed, with more than 90% of pallets in the US made from hardwood and softwood lumber, the shortage of lumber has severely affected the pallet industry. Many sawmills have been prioritizing shipments to home builders and big-box retailers – who have more purchasing power – leading many pallet producers and retailers facing critical shortages of pallet cants and other lumber components needed to fix and repair pallets. Not only can firms produce fewer new pallets, but firms’ ability to repair damaged pallets has also been affected by the lumber shortage – companies unable to obtain replacement cants are faced with the difficult choice of cannibalizing one pallet to repair several others.

A recent acquisition announcement shows how one firm in coping with the shortage of lumber. Kamps – one of the nation’s leading pallet repair and management firms – announced that it would purchase Buckeye Diamond Logistics, a firm that also provides pallet repair and management services. The acquisition:

• expands Kamps’ national pallet stock – a key consideration when firms are looking to lease as many pallets as possible to ensure timely shipment of their goods
• boosts the company’s network of pallet repair and maintenance facilities
• increases Kamps’ inventory of trailers used to haul pallets, making it better able to quickly shift pallets to a customer experiencing a temporary shortage
• adds to Kamps’ purchasing power – some sawmills will only sell to firms willing to buy large quantities of lumber

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, including Pallets and Global Pallets. Freedonia Custom Research is also available for questions requiring tailored market intelligence.