Strong Pallet Market Buffeted by Supply Chain Crises

The recent blockage – albeit temporary – of the Suez Canal demonstrated how tenuous the global supply can be, threating shipments of thousands of items worldwide. However, another item is as critical to the global economy as a giant freighter – and equally in peril: the humble pallet. Demand for pallets has risen over the past year as shipments of construction materials and numerous industrial products have remained strong, even during the COVID-19 pandemic. Furthermore, as more and more consumers shop from home, pallets are in demand to handle the vast number of packages shipped to and from warehouses and distribution centers.

However, as a recent article demonstrates, the swelling market for pallets is threatened by a series of challenges:

• Surging lumber prices and a shortage of available lumber stock have made it difficult for wood pallet manufacturers to obtain the main raw material for their products.
• Increasing nail prices – more than 100 can be used to assemble each pallet – have further driven up pallet costs.
• Labor shortages – from workers needed to assemble pallets to the truckers needed to transport them to manufacturers and shippers – have producers scrambling to find employees to assemble and repair pallets and deliver them to customers.

While wood pallets will remain the leading pallet material going forward, rising costs and a lack of supply may encourages to use plastic pallets. Though more expensive, pallets made from plastic offer end users a number of advantages, such as lighter weight and the ability to be used for many trips before requiring repair or replacement. More importantly for suppliers, plastic pallets are more readily available than those made from wood.

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.