Pallet timber is rising at its fastest rate and showing no signs of slowing. According to the latest European reports, the index price of pallet timber alone grew cumulatively more than 20% over the last three quarters of 2020. This phenomenon is happening across the globe. A report from the US government reflects the pallet category in the Producer Price Index has risen for 13 straight months, jumping 31% this year. A wooden pallet typically costs between 7.5 and 10 euros; however, it is expected to approach 12.5 euros this year. That is an extreme price increase, which has significant implications for supply chains.
These excessive prices have been driven by several factors, including a shortage of raw materials and increased demand. The closure and reduced operations of many sawmills at the beginning of the global pandemic, coupled with government policy in limiting logging areas, for example, in Indonesia, has led to a shortage of raw materials. Additionally, there has been an increased demand for materials as pallet manufacturers compete for wood with other industries, such as home construction, which is currently booming.
There are estimated to be five billion pallets in use worldwide, 90% of which are wooden, and the remaining 10% comprise plastic, metal, or cardboard. With such a high percentage of wooden pallets, the issue of high prices is compounded[6]. In addition, lead times are long, and container transport is not readily available everywhere. All this makes owning and shipping pallets incredibly challenging.
So, what effect does this high price have on your supply chain? How can you reduce the impact of rising wood pallet prices and create a more predictable cost base? Given the volatility of the current market conditions, using wooden pallets can be very costly. Indeed, reusable plastic pallets are a more attractive option.
The value of reusable plastic pallets
Sourcing reusable plastic pallets is an obvious way to protect yourself against the instability of wood prices. Outside of the cost-benefit of sourcing plastic pallets in an unstable wood market, reusable plastic pallets present several key benefits over wood pallets. For one thing, they are stronger than wood pallets, better built, and therefore last longer. All this means you can minimize sourcing issues and improve overall efficiency. Some plastic pallets providers reuse pallet material at the end of the asset’s life cycle to create more reusable pallets. This process is both more sustainable and beneficial to their material sourcing process.
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