Why the price of white wood pallets has increased so rapidly

Why the price of white wood pallets has increased so dramatically (and will continue to do so)

You are now paying 10 to 20% more to buy exchangeable wooden pallets than you were last year. What is more, you sometimes have to wait weeks for them to be delivered. What’s going on? Why has the price of wooden load carriers suddenly skyrocketed?

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Now that the economy is back up at full speed, the demand for wooden pallets is also increasing.

Pallet wood is 10% is more expensive than last year
Pallet producers throughout Europe will be raising their prices soon. The most obvious explanation for this is the startling increase in the price of wood. The German Association for Wood Packaging, Pallets and Export Packaging (HPE) has been keeping track of these developments since 2005 and reported a 4.4% rise in prices in the first quarter of 2018 alone, with a 13% price rise for the entire year. There are several reasons for this.

Less logging due to a damp forest floor
A lot of pallet producers in Northern-Europe import their timber from Scandinavia and the Baltic States. However these regions have been battling all winter with poor logging conditions resulting from a wet summer and autumn. The forests are waterlogged, making it difficult for harvesters to enter them. Moreover the forest floors are damp, rather than frozen, which makes it impossible to drag the wood away. Because of the climate change winters will not be getting any colder or longer. All in all, it is very difficult for loggers to meet their delivery commitments, and it willonly get worse. The governments of Lithuania and Estonia have even recognised the heavy rainfall and flooding of 2017 as a national disaster, with a view to protecting logging companies against damage claims.

Fewer sawmills focus on wooden pallets
Another explanation for the timber shortage – and therefore the rise in prices – has to do with the sawmills themselves: many sawmills scaled down or stopped their activities during the economic crisis, or started to focus on other niche markets such as timber for gardening, flooring or construction purposes. The capacity of wood and pallets is therefore very low.

Chinese businesses are buying up European stocks
However, shifts are not only occurring on the supply side. It is apparent from growing demand all over the globe that European pallets are very popular. Especially China is increasingly placing orders with European pallet producers to replenish its stocks. Last year, 3.25 million cubic metres of sawed timber and processed wood products were exported from Europe to China: an increase of 55% on 2016. There is hardly any timber for production purposes available in China, and the added cost of transport from Europe seems to be no deterrent to them.

Flourishing economy is pushing up the general demand for wooden pallets
Moreover, now that the economy is back up at full speed, the demand for wooden pallets is also increasing elsewhere . The European Pallet Association (EPAL) estimates that approximately 115.8 million white wood pallets were in use in 2017, of which 88.3 million were newly produced. This is approximately 10% more than the year before. Nevertheless, it is not enough to satisfy the growing demand worldwide. After all, pallets are indispensable to many manufacturers for shipping the goods they produce.

Transport and steel (nails) have also become more expensive
The fact that you are paying more for your exchangeable pallets also has to do with the rising price of steel and therefore the production of nails, as well as increasing freight costs. Add to that the fact that many transport companies all over Europe are struggling with a shortage of drivers, which is one of the reasons why deliveries can take so long.

Pallet pooling less impacted by price rise
According to analysts, this situation will persist, which means that the prices will not drop any time soon either. Just as white wood pallets, pooled pallets are hit by the consequences of this price rise, although the impact on pallet pooling is a lot smaller. Wood and transport costs have a less bigger role in setting the price for pooled pallets than of exchangeable pallets. Thanks to the sustainable “share & reuse” model, the price rise of pallet pooling is limited in comparison to the classic pallet exchange system.

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Why the price of white wood pallets has increased so dramatically (and will continue to do so)