By Paul W. Norman for Cantarero Pallets, Inc. Dec 2022
With all the controversy about wood pallets issues affecting the logistics and distribution industries, one thing remains certain; while wood pallets sales quantities and redistribution survived the last three tumultuous years relatively unscathed, 2023 is forecasted to be uncertain at best.
No doubt, there have been a lot of positive changes to the wood pallet industry. The technologies developed to manufacture new pallets, and warehouse, restore and recycle used wood pallets has dramatically improved. The everlasting challenges to using wood pallets vs plastic pallets has also created increasing competition to continue to improve both. But, domestic and international trade problems, especially with China and its civil unrest, along with ongoing concurrent supply chain problems continue to plague pallet quantities supply pricing, and end-user product delivery delays.
While the COVID-19 pandemic seriously disrupted brick and mortar sales, Internet sales and distribution skyrocketed creating increased demand for the wood pallets industry. The pallet business, in general, bounced back with a vengeance. And while e-commerce took off during the pandemic, its growth has flattened, at least for the moment, as regular retail has regained traction. “We saw significant growth during the pandemic, but then, in early 2022 business tapered off” said Anwar Cantarero, President and Owner of Cantarero Pallets, Inc. in Wauconda, Illinois. “We knew sales would come back, but the problem was calculating when and by how much. We needed to figure out how to develop creative ways to increase customer awareness and sales because we didn’t know when or if the pandemic would end. Now, we face new issues as well, with new problems with delivery of products due to China’s civil problems and our customers’ demand needs for new and even recycled pallets”
As of September 2022, total retail sales were expected to reach $6.624 trillion, but came in short of that by late November 2022. “With retail making up such a large portion of the total U.S. economy, retail trends have a significant effect on pallet use and overall demand,” says Cantarero. “We’re watching detailed economic indicators more closely than ever before as part of our strategy to adjust our manufacturing, sales, marketing, to meet and exceed our customer demands better. We’re also forming close partnerships with more clients to align our strategies better with them on an annual basis.
Commercial and industrial customer demand seems to be faring better, but is still being adversely affected, indirectly by the national and international supply chain problems. Used, or recycled pallets, however, have maintained more stability.
Some companies prefer new pallets, others prefer used options and still others take a hybrid approach when selecting pallets. Overall, 54% of companies say they purchase new wood pallets, while 72% acquire used or core wood pallets. About 8% say they use a pallet pool—a percentage that’s decreased from 24% in 2020 to 18% in 2021 to 17% in 2022.
Used pallets are in short supply this year. Of the companies that prefer this option, 56% say fewer pallets are available, 44% say the quality of the used pallets is not as good as new pallets, and 40% say used pallets are more expensive. While plastic pallets have always been an option, wood pallets remain a preferred material due to its natural sustainability and renewability.
The used pallet shortage has exacerbated over the last year, presumably due to the pandemic-related supply chain constraints and disruptions. In 2018 and 2020, for example, 27% of companies were experiencing shortages of used pallets and in 2022 that percentage increased to 29% due to the additional issues with China’s supply chain issues and global energy disruptions.
Regardless, there remains a surprisingly strong demand for consumer goods and durable products considering recent world economic events. If history tells us anything, short of a severe long-term recession, the sheer number of new and remanufactured wood pallets needed nationally and internationally to meet consumer product, commercial and industrial supply demand will, as it often does, stabilize, and most likely increase throughout 2023.