Global demand for pallets is expected to rise nearly 4% annually to 6.4 billion units in 2024 despite a COVID-19 related slowdown in near-term sales. Gains will be driven primarily by expanding pallet stocks in industrializing nations, particularly in the Asia/Pacific region, which is to account for the largest share of gains through the forecast.
Meanwhile, in North America and Western Europe, market maturity and large pallet stocks will continue to hinder new sales opportunities. However, the ubiquity of the low-cost wooden pallet sustains high replacement sales, as these are more prone to breaking after repeated use than metal or plastic types.
These and other trends are analyzed in depth in the Freedonia Group’s newly published study, Global Pallets. Below are some of the key highlights.
1. Asia/Pacific Surpasses North America as World’s Leading Market
The Asia/Pacific region overtook North America to become the world’s largest regional pallet market in 2019, and is expected to account for 40% of global pallet output in 2024.
- Regional demand growth will be fueled by the need to expand pallet stocks in industrializing countries as their manufacturing sectors expand and their logistics networks modernize. Rising e-commerce will further boost the need for pallets in storage and distribution.
- India and China are expected to be the world’s two fastest growing national markets, building on already sizable demand levels as they expand their pallet stocks. Indonesia and a handful of other rapidly developing Southeast Asian nations are also expected to achieve strong gains.
The US was the world’s largest pallet producer in 2019, but is expected to fall to second behind China by 2024, as rapid expansion of local markets drives robust growth in regional production. High US production levels are attributable to the industry’s long history in the country, as modern pallet use largely originated in the US.
2. Rising E-Commerce Sales Boosting Pallet Demand in Storage & Distribution
Increasing e-commerce sales via platforms like Alibaba and Amazon are boosting pallet demand in warehousing applications worldwide. In the US, for example, the fastest growth is expected to occur in the warehousing market, which accounts for an above average share of demand by global standards, in large part due to its robust e-commerce sector. Similarly, in the Asia/Pacific region, gains in warehousing sales will be fueled by the growth of e-commerce firms.
3. As COVID-19 Slows Shipments, Pallet Suppliers Feel Sting
As use of pallets is related to manufacturing activity and consumer demand, the negative economic disruption associated with the COVID-19 crisis is likely to reduce sales of pallets, even as replacement pallets continue to be necessary for the continued distribution of goods.
However, one potential positive aspect is the growth in e-commerce driven by supply chain disruptions and social distancing guidelines. For example, in March 2020, Amazon announced that it would hire as many as 100,000 new employees worldwide to keep up with the surge in online shopping. This will likely accelerate growth in the warehousing market, which was already outperforming pallet market averages in the US.
4. Sustainability a Growing Concern for Pallet Suppliers
Wood pallet manufacturers and users have worked to become more “green” in large part through the expansion of pallet recycling and/or refurbishment programs. For example, rather than dispose of pallets, users can send them to pallet refurbishers, who:
- can quickly repair slightly damaged pallets by replacing broken boards with fresh panels
- use undamaged components of more severely distressed pallets to repair other pallets
Rebuilt pallets are either returned to their original owners or sold on the open market, while those parts of the pallets that are too severely damaged to be refurbished are burned for fuel or ground into such products as mulch or animal bedding.
Producers are also improving sustainability by increasing their use of recycled content, which is helping boost sales of plastic and corrugated and molded pulp pallets. Pallets made from non-wood materials such as metal or plastic are generally considered more sustainable because their longer lifespans reduce replacement rates, and in the case of plastic, their light weight can improve fuel economy in transport. Furthermore, pallets made from corrugated paperboard, plastic, and metal can be fully recycled.
About the Author:
Peter Kusnic is a Content Writer with The Freedonia Group, where he researches and writes studies focused on an array of industries.