MMH’s Changing Pallet Landscape – More Plastic, More Export, More Challenges Sourcing Quality Used Pallets

This year’s pallet user survey from Modern Materials Magazine once again provided a useful window into the U.S. pallet market, and if you have an hour to spare, I would encourage you to view the on-demand pallet survey webcast or read Modern’s Pulse on Pallets.

So what were the key findings from the qualified survey sample of 672 respondents? Here are some the things that stuck out for me:

Price is still king from an overall market perspective, but other factors are significant. When it comes to the primary consideration for purchasing a certain pallet, pallet price still was the response of 63 percent of qualified respondents, but this is nothing new to the pallet market. Noteworthy is the importance of other considerations. Dr. Mark White, who provided expert commentary in the webcast was happy as a pallet designer to see pallet strength weigh in second at 55 percent. Another popular choice was customer requirements (43 percent), reflecting on the growing trend towards customers specifying pallets they believe will better optimize their supply chains, such as in the cases of Costco and Ikea.  Meanwhile, durability measured a 49 percent response while reusability registered with 38 percent and cost per use at 35 percent, demonstrating that reusability, and its benefits, are weighing into the decision process for many pallet users.

Plastics increasingly are coexisting with wood. While 94 percent of respondents say they use wood pallets, 40 percent of respondents report using plastic pallets, up from 33 percent in the previous year’s survey. Also from the survey, 27 percent of respondents said they were using more plastic pallets than the year before, while 13 percent said they were using less. White suggested that users may increasingly be employing plastic pallets in captive or closed loop applications.

Dr. White also observed that other alternative materials do not seem to have shown much movement. The other materials tracked were wood composite (17 percent), cardboard/corrugated (8 percent) and metal (7 percent). The implication from the webcast was that heat treated wood pallets are largely carrying the load with respect to the provision of supply to meet increasing export requirements. More on export follows below.

Limited used pallet availability is impacting pallet users. While 40 percent of respondents have not experienced issues in sourcing used pallets nor anticipate it, 31 percent report quality issues, 21 percent report supply availability issues, while 17 percent report higher pricing. While previously we have heard from pallet recyclers about the availability issues they face, this is the first real glimpse of the impact this shortage is causing in the marketplace.

Palletized exports are an important component of the market. Modern’s readers ship both internationally and domestically to a tune of 57 percent, while another 4 percent ship only internationally. That leaves 39 percent who ship only domestically. The leading export destination for respondents is Canada, which is shipped to by 74 percent of respondents who export. To me, this emphasizes the importance of the impending termination of the ISPM-15 exemption between the two countries, and what it will mean in terms of pallet selection. Other destinations of importance included Mexico/South America/Caribbean (66 percent), China/Asia (57 percent), Western Europe (4 percent) and Eastern Europe (36 percent).

One of the more interesting sidebars of the webcast was Dr. White’s observations on a recent trip to China, and his thoughts on the growing cost of labor there. As that trend increases, in conjunction with other supply changes, he anticipates that more and more of the 20 million TEUs arriving from China will increasingly be palletized. Based on his past research, the most efficient solution is generally to palletize using the pallet specification common to the country of destination. Will this be a significant source of wood pallet cores to the American wood pallet industry in the future? There is no question that China’s domestic pallet industry continues to expand quickly, as demonstrated by events such as the China Pallet International Conference.

Little footprints make bigger noise. Modern notes that while 81 percent of readers use the 48×40-inch footprint, nearly 10 percent report using a 24 x 20-inch half pallet, typically utilized for display-ready applications.

For a more detailed look, be sure to check out the webcast, which was sponsored by Orbis.

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