Lumber shortage hikes cost of pallets for Northern California manufacturers
When the accounting department notices the price of wood pallets spiking, it’s a sure sign the norms in the business world have shifted.
May was the second consecutive month the Institute for Supply Management noted wood pallets being in short supply.
The shortage translates to higher prices. According to the U.S. Bureau of Labor Statistics’ producer price index, the price of wood pallets increased 19% from April 2020 to April 2021.
This is not a surprise to Brad Tucker, director of sales for Encore Glass in Fairfield. He has seen the price of pallets and boxes double.
Pallet prices in the U.S. are usually between $9 and $12. Today it’s closer to $15 on average. In California, where goods often cost more than the national average, businesses are seeing an even greater increase.
One North Bay company that didn’t want its name used said pallets had gone from $10 to $26 in the last three to four months.
Nearly any company that has inventory uses pallets for storage.
When goods are transported via ship, rail and truck they often get placed on a pallet. By design it’s easy to move them by forklift. Using a standard size pallet makes it easy for warehouses using robots to systematically move pallets of product.
According to the National Wooden Pallet & Container Association, the wood pallets are an $11.5 billion industry in the United States. Almost 3,000 mills make them in each of the states; most being family owned.
“Prior to the coronavirus outbreak, nearly 2 billion pallets were in use across the U.S. during any given day. The total number of pallets in circulation each day is likely higher now,” the association’s website states. “More than 93% of all goods are shipped using pallets. The increase in demand for food, essential medicines, sanitizers and other critical items that are shipped on pallets is a clear demonstration of how essential the pallet industry is at this time.”
Even though pallet makers were deemed essential workers during the height of the pandemic, they too had difficulty getting lumber and had to create work areas that conformed to state and federal rules, such as social distancing for workers.
Today, in addition to the price going up, pallets are not readily available.
Ed Davis, president of Empire West Plastics in Graton, was hit with the pallet scarcity reality at the beginning of the year.
Most pallets are 48 inches by 40 inches. Davis’ supplier wasn’t able to secure that size, so he suggested creating custom pallets. While this took time and money to construct, it was an answer, at least for now.
“If you can’t get the cheap stuff, what is the expensive stuff going to cost?” Davis asked rhetorically of the lumber industry.
The Business Journal in April reported how lumber prices had gone up 180% in one year. Now the National Association of Home Builders is saying, “Lumber prices have skyrocketed more than 300% since April 2020, causing the average price of a new single-family home to increase by nearly $36,000.”
Goods for house building also come on pallets. Pallets may be at the bottom of the rung in the wood industry, but as the National Wooden Pallet & Container Association says, “Pallets move the world.”