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Why the price of white wood pallets has increased so dramatically (and will continue to do so)
If you look at the graph of wood prices in 6 countries according to FEFPEB, the European Federation of Wood Pallet and Packaging Producers, you will see a sudden increase as of February 2021. After a slight drop in early 2022, they have been rising again since March. In Europe and by extension throughout the world, all sectors working with wood were confronted with a suddenly very expensive raw material. What is going on? And what does that mean for your wooden pallets?
Increasing demand, decreasing supply
Decreasing supply, rising demand
The prices of pallet timber are skyrocketing. In April, the Dutch Central Bureau of Statistics recorded a 58-69% increase in the price of pallet timber compared to the same month in 2021.
The easiest explanation: the demand for wood has increased, but the supply has decreased.
Demand has increased
The demand for wooden pallets is increasing. In 2021, 101.3 million EPAL wooden europallets were newly produced, with a total number of repaired and produced pallets of 123.5 million. This is a record number. In 2020, there were 123.5 million, of which 97.3 million were newly produced pallets.
But the rising demand is not just for pallet wood, and not just in Europe. In the United States, for example, the demand for wood has been very high since the corona crisis. Especially in the construction sector, which is flourishing as never before. European wood is therefore exported to America, and China, more than before the pandemic.
Supply has decreased
If we take a step back and look at forests in general, the situation there is also alarming.
According to the FAO (Food and Agriculture Organization of the UN), ten million hectares of forest has disappeared between 2015 and 2020. Since 1990, more than 80 million hectares have disappeared worldwide. That is more than ten times the surface area of the entire Benelux.
In addition, climate change is causing droughts and forest fires - mainly in the United States - and mudslides. The rise of spruce beetles has also wreaked havoc in recent years. As a result, a lot of forest has been cut down and now we have to wait again for new, healthy wood.
Other influences on the timber and pallet price
Besides the shortage of wood and deforestation, there is another important shortage that indirectly affects the price increase: personnel shortages.
Truck drivers are becoming scarcer all over the world, and logistics workers are also harder to find. According to the quarterly survey by the Logistics and Transport Sector Institute, 52% of logistics companies experienced difficulties due to labour shortages in the third quarter of 2021, and 46% in the fourth quarter.
Several unexpected and major shifts in the world that are occurring in rapid succession, including Brexit, COVID-19 and the conflict between Ukraine and Russia, are weighing on the timber industry and global supply chains, and are driving inflation up.
These issues also indirectly impact timber and pallet prices.
The consequences of this price rise and the turbulent market situation are therefore being felt for both white exchange and pool pallets.
Pallet pooling as an efficient and sustainable alternative
According to market information, fluctuating raw material prices, labour restrictions, transport problems and delays and driver shortages will not immediately return to previous levels in the short to medium term.
Therefore, like other companies, we have taken some actions to ensure that we can continue to serve our customers as efficiently and sustainably as before.
In a normal, stable economic market, wood and transport costs make up a smaller proportion of the price of pooled pallets. Thanks to CHEP's circular system, the price increase in pallet pooling can be limited compared to the classical exchange system.
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