Letter from Ed: Lumber Changes Coming Fast and Furious
Founder of Pallet Enterprise explains the current state of the low-grade lumber market and talks about the importance of having the right intelligence and resources as you discuss the fluctuations with customers.
By Edward C. Brindley
Date Posted: 7/1/2018
The pallet industry is in the midst of a historic lumber market, which has created both blessings and curses. Most pallet companies report being busy and having to turn away business. That is a good thing. They also are struggling with inflationary costs in almost every part of their business with the worst part being lumber prices that keep going up.
Many pallet customers are resistant to price increases, but they are starting to pay up if they want pallets. The market has reached a point where suppliers can no longer eat the higher costs. If you want pallets, you have to pay for the new, higher pricing.
The numbers don’t lie. Lumber prices are reaching very high levels. Hardwood cant composite prices went up $76 or 19.5% from $389 in May 2016 to $465 in June 2018. Actual prices vary per state, and these numbers are an aggregate for the entire hardwood region. As supply remains tight, hardwood cant prices continue to climb.
Western softwood #4 lumber (2x4 and 2x6) composite prices have gone up even more. They have gone up from $216 as an average in August 2016 to $348 in June 2018. This is a 61.1% increase of $132 during almost a two-year period. Softwood prices continue to trend higher, but actual increases have eased down a little more recently.
When it comes to educating customers about the realities of the pallet market, many pallet companies have a secret weapon. They are subscribers to our market reports – the Pallet Profile Weekly and the Recycle Record.
We recently published a white paper entitled “Price Shock – Exploring Historical Market Shifts for Low-grade Lumber and Pallets.” This resource was made available to paying subscribers of our market reports with no copyright restrictions so that they could freely distribute to customers and partners. Many pallet companies have called into our offices telling us how helpful these white papers have been in this tough market.
Any Pallet Enterprise reader who would find such an unbiased white paper to be helpful can still get a copy by subscribing to the Pallet Profile. In addition, you will get access to the market report, our business analysis, a deep online archive of proprietary information and much more. While the Enterprise is great, these market reports are better to stay up on the latest industry information. You can subscribe by calling 804-550-0323 or visiting www.palletprofile.com.
So, let’s chat for a second about the current state of the pallet lumber market. Low-grade green hardwood cants have become more difficult to locate on a regular basis throughout North America east of the Rocky Mountain States. Other green hardwood board and lumber sources, including cut stock lumber, have become more and more difficult to locate. All of these pallet hardwood sources have gone higher in price as well. Many areas have had unusually heavy rains this spring and early summer, which have added to the difficulty of locating enough hardwood lumber.
Hardwood log exports, particularly to China, have reduced the availability of hardwood logs in North America. Recent restrictions on hardwood log imports into China because of concerns over pests being shipped across the Pacific Ocean may have an impact on total volumes headed to China. But this has yet to materialize in any big way to ease supply tightness.
The shortage of lumber for the pallet industry is not restricted to hardwoods. Softwood log exports have been strong to China as well. Canadian softwood lumber shipped across the northern border into the United States has also been limited. This has been due to a combination of duties placed on softwood flowing out of Canada and a shortage of trucks caused by challenges complying with new e-log regulatory changes.
Southern Yellow Pine and Canadian SPF lumber have all found themselves to be in a more limited supply. So, when pallet companies are looking for an alternative lumber source, they find themselves running into a solid brick wall.
Even the availability of used pallets and pallet cores that once helped solve any lumber shortage situation may now find their availability very limited. In addition, the quality of used pallet cores has deteriorated to the point that pallet recyclers are very concerned about the availability of future pallet cores. Regardless of what source of raw materials the wooden pallet industry pursues in the future, it seems likely that wood will continue to be the most economical material source for needed pallets.
Smart companies are doing whatever they can to keep a pulse on the market beyond just their city and region. That’s where our market reports can provide you a complete view. The Pallet Profile regularly shares about market developments, industry trends, regulatory actions and other key news that you need to know. This information is presented in an easy-to-read format and will save you time. Plus, our best insights and analysis are shared in the pages of the Profile and Recycle Record, not the Enterprise.
What are you waiting for? In this rapidly changing, tough market, you need all the help you can get. And we are here for subscribers. Every paying subscriber to the Pallet Profile and Recycle Record receives access to our exclusive webinars, one hour of free consulting and one free classified ad in the Pallet Enterprise. These bonuses along with our white papers are worth the subscription price.
Contact us at 804-550-0323 for information about the Pallet Profile or Recycle Record. Also, you can subscribe online by visiting www.palletprofile.com.
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