The unprecedented price volatility of recent years remains a pressing concern for many market participants, with supply chain managers often citing a lack of transparency as they navigated the rapid and unpredictable shifts in the pallet market.

With supply chains beginning to stabilize, a new wave of uncertainty looms, fueled by conflicting economic indicators that pull the economy in divergent directions. In this evolving landscape, understanding the forces shaping the market is more critical than ever.

To meet this need, Fastmarkets has launched a first-of-its-kind pallet analytics service, offering the tools and insights market participants need to navigate these challenges. This service includes:

• Monthly prices for a new western softwood GMA A-grade stringer pallet across six key metro hubs
• Cost model for a new western softwood GMA A-grade stringer pallet across six key metro hubs
• Monthly indicator of pallet supply from global trade
• Low-grade lumber price forecasts
• Key macroeconomic and pallet market indicators to track industry trends

You can get early access to our pallet price data and analysis for a limited time only by signing up to the pallet newsletter.

As the pallet market adapts to shifting dynamics, several core issues are emerging as critical drivers for the year ahead.

US housing market playing catch-up after slow decade

The US housing market in 2024 has softened under the weight of high mortgage rates and economic uncertainty. Existing home sales fell to their lowest levels since 2010, with an overall year-to-date decline of 3% by August. Despite the Federal Reserve beginning to lower rates in September, the recovery is expected to be gradual, with meaningful demand improvements likely by mid-2025.

On the other hand, new home sales have been a bright spot, rising 3% through August. Large homebuilders have mitigated affordability issues by offering rate buydowns that reduce mortgage rates to the mid-5% range and as low as 4% in some cases, alongside other incentives such as covering closing costs and offering home upgrades.

These measures have successfully buttressed sales without resorting to steep price cuts.

The US housing market faces a backlog of roughly 2 million units, stemming from a decade of underbuilding since the 2008 financial crisis. To meet demand, approximately 1.5 million units need to be built annually; however, between 2008 and 2019, construction averaged only 1 million units per year.

In terms of construction activity, single-family housing starts have shown modest growth, running at an annualized rate of 1 million units for the August-October period, 4.5% above last year’s pace. Conversely, multifamily starts have trended lower, down 15% from a year ago.

Looking ahead, falling mortgage rates and improving builder confidence signal a potential upturn. However, the interplay of affordability and supply expansion, particularly for middle-income buyers, will be pivotal.

Federal policy changes, particularly under the new Trump administration, will influence bond markets and mortgage rates, indirectly shaping the housing landscape. Builders remain cautiously optimistic, with November’s NAHB Housing Market Index showing a six-month sales outlook improvement for single-family sales with an index score of 64, rising by four points. These developments will be closely watched for their impact on housing—and, by extension, pallet demand, as framing lumber prices are a key leading indicator for low-grade lumber.

Trump’s tariff threats: A risky trade war with North American partners

President-elect Donald Trump’s renewed threat to impose sweeping tariffs on Mexico, Canada and China has raised serious concerns about the potential fallout on US trade relationships. While targeting China has been a hallmark of Trump’s trade policy, the inclusion of Mexico and Canada in these tariff threats significantly heightens the stakes, as these are the United States’ top three trading partners.

Trump has argued that Mexico’s role as a “backdoor” for Chinese goods—where Chinese manufacturers set up operations in Mexico to bypass US tariffs—is justification for this move. However, Mexico and Canada have expressed strong opposition, with Canada’s Prime Minister Justin Trudeau warning that retaliatory tariffs could hurt both nations, given their deeply integrated supply chains.

The US-Mexico-Canada Agreement (USMCA) was designed to maintain duty-free trade between the three nations. Imposing unilateral tariffs would violate this agreement, risking a breakdown of the framework that supports a significant portion of total US trade, with auto manufacturing and agriculture being some of the industries that would feel the squeeze the most.

Retaliatory tariffs from Canada and Mexico could disrupt key supply chains and increase costs for American consumers. With such high interdependence, a trade war among these countries would likely prove more detrimental to the US economy than beneficial. However, Trump and his allies, including his pick for Treasury Secretary, argue that the tariffs implemented during his first term achieved key economic objectives, such as increasing federal revenue, without significantly contributing to inflation.

As the diagram of trade flows illustrates, the stakes are simply too high for the US to alienate these critical partners, as the three countries that President-elect Trump has explicitly announced he’s considering placing tariffs on make up 41% of total US trade. Notably, the share of total trade with the rest of the top 15 falls dramatically.

Retaliatory tariffs and disrupted trade flows could also have significant implications for pallet demand. The North American pallet market relies heavily on the movement of goods across borders and any reduction in cross-border trade or increased costs for goods would likely dampen the demand for pallets used in shipping and logistics.

Cautious optimism: Positive trends amid uncertainty

Despite economic challenges, several indicators suggest reasons for cautious optimism heading into 2025. Real wages are rising, the stock market remains strong, and falling interest rates could support broader job growth in the coming months.

The Federal Reserve appears poised to cut rates further, with traders assigning a 91% probability of a December reduction, according to the CME FedWatch tool. This came following a strong jobs report showing the addition of 227,000 jobs in November, exceeding expectations without overheating the labor market.

Another encouraging sign is the decline in seasonally adjusted credit card delinquency rates in Q3, falling to 3.23% from 3.24% in Q2. This marks the first drop since 2021, signaling that the financial strain on consumers from the inflationary pressures of 2021-2022 may be easing.

Retail performance also reflects resilience. Black Friday and Cyber Monday online sales hit record highs, with consumers spending $10.8 billion and $13.3 billion, respectively, according to Adobe Analytics. Toys led the surge, with sales 680% higher than average October levels, alongside strong demand for electronics, apparel, and gift cards. Notably, many of these goods are transported on pallets which is a promising harbinger for the industry.

At Fastmarkets, we specialize in turning complexity into clarity. Our comprehensive price data and analytics services are designed to help you navigate these challenges with confidence. By monitoring economic shifts, global trade dynamics, and sector-specific developments, we provide the insights and forecasts you need to make informed decisions. Whether you’re managing supply chains, assessing market opportunities, or planning for future demand, you can speak to one of a member of our team to learn more about our expertise and cutting-edge analytics keep you ahead of the curve.

The post The state of the North American pallet market appeared first on Fastmarkets.

With tariff implementation potentially a few months away, industry stakeholders are scrambling to prepare for the potential challenges ahead, including navigating port efficiency concerns and facing rising costs across supply chains. However, the changes will also bring opportunities for supply chain managers, manufacturers and freight companies.

This month’s edition of the newsletter includes

• Our latest pricing data for western softwood, GMA A-grade pallets
• Insights into how President-elect Donald Trump’s tariff announcement could impact the market, including comparisons to the 2018 tariffs
• Analysis on how the wider global economic uncertainty will influence costs

Interested in early access to our prices and analysis? Sign up to the pallet prices newsletter to be the first to receive them.

Pallet pricing trends

Western softwood US pallet manufacturers reported a seasonal uptick in demand as holiday retail sales picked up and buyers turned their attention to Q1 2025.

Fastmarkets assessed Pallets, western softwood, GMA A-grade delivered Seattle at $11.00-17.00 per pallet on November 27, unchanged from the previous month.

While producers benefited from an uptick in sales, recent pushback on prices due to the continued glut of used and lower-quality pallets stymied any significant upward momentum. The other major market in the western softwood producing region, San Francisco, also remained stable this month.

Fastmarkets assessed Pallets, western softwood, GMA A-grade delivered San Francisco at $10.50-16.50 per pallet on November 27.

Competition from used and lower-quality pallets remained steep. Good quality used B-grade pallets and excellent quality block pallets were offered from $8-10 in the downtown San Francisco area.

Trading ranges narrowed in New York City and Dallas-Fort Worth as lower-priced Southern Yellow Pine hit the market.

Fastmarkets assessed Pallets, western softwood, GMA A-grade delivered New York at $10.50-16.50 per pallet on November 27, a $0.75 decline to the low and a $1.75 decline to the high over the previous month.

Producers in these regions faced steeper competition from alternative grades in addition to lower-priced Southern Yellow Pine. Good quality B-Grade pallets were readily available at significant discounts, capping profits. Multiple producers reported switching to Southern Yellow Pine this month as it became more readily available.

In addition to the seasonal retail holiday spike, buyers reported that they are turning their attention to Q1 of next year. With a new administration and tariffs looming, numerous large pallet buyers decided to make extra purchases to prepare for an uptick as next year’s activity gets underway.

As Fastmarkets ramps up its coverage of the pallet market, we invite feedback on specific pallet-related items for future reports. Contact ian.templeton@fastmarkets.com with comments or to contribute future pricing information.

Tariffs, trade and supply chain dynamics: A renewed challenge for 2025

The US trade landscape is once again bracing for disruption, with echoes of the sweeping tariffs introduced in 2018. During that period, Donald Trump’s administration imposed tariffs aimed at reducing the trade deficit and protecting domestic industries, including a 25% levy on steel and 10% on aluminum imports. These policies, largely targeting China, eventually escalated to cover over $250 billion worth of goods, sending shockwaves through supply chains and reshaping freight markets. Now, with new Trump tariffs on the horizon, the industry faces familiar challenges—but in an even more volatile global environment.

When the tariffs hit in 2018, businesses rushed to import goods ahead of the increased costs, triggering freight frontloading on an unprecedented scale. Shipping rates soared—ocean container rates alone jumped by over 70%, according to Xeneta. Ports buckled under the strain, particularly in Long Beach and Los Angeles, where congestion brought delays and bottlenecks.

We may be heading for a similar scenario, with transportation company C.H. Robinson warning that new tariffs could take effect as early as late February or early March, leading to another wave of frontloading as companies seek to avoid higher costs. With port labor uncertainty already a concern, Southern California ports could once again see surges in activity and delays.

One of the unexpected outcomes of the 2018 tariffs was their short-term benefit to the freight industry. The rush to move goods before tariffs took effect created tight trucking capacity, higher rates, and stronger volumes, resulting in a banner year for many transportation companies. But that boost came at a cost. By 2019, freight markets slowed as demand softened and rates fell—not just in trucking, but also in rail and intermodal sectors. If history is any guide, a similar boom-and-bust cycle could play out in 2025.

For the pallet industry, tariffs are not just a macroeconomic concern—they directly affect costs. Components like nails, many of which are imported, are already subject to steep tariffs. Further increases could push costs higher in an industry that operates on razor-thin margins. Any added expenses are likely to be passed down the supply chain, affecting manufacturers, retailers, and end-users.

ILA strike: A standoff over automation and its ripple effects

The recent strike by the International Longshoremen’s Association (ILA) remains a critical focal point in logistics managers’ short-term outlooks. The three-day strike in October sent shockwaves through the logistics network, with congestion that took weeks to unravel. Everstream Analytics reported that the number of container ships waiting outside ports jumped from 5 to 54 by the strike’s end on October 4.

The deadline for a settlement was delayed to January 15^th and one of the core issues at the heart of the ILA’s dispute is automation. The union is staunchly opposed to the development of fully automated terminals—a stance that is enshrined in their existing contract, which bans equipment devoid of human interaction. While the US Maritime Alliance (USMX) has offered to maintain this language as a concession, automation remains a thorny subject.

President-elect Donald Trump’s pro-union position adds another layer of complexity. Despite his broader agenda to boost US competitiveness, which could benefit from port automation, Trump has expressed support for the ILA’s anti-automation stance. During a meeting at his Mar-a-Lago resort last fall, he promised to back the union on this issue. This alignment presents a paradox: improving efficiency at US ports is crucial for competing on the global stage, yet resistance to automation keeps US facilities lagging behind. The ports of Long Beach and Los Angeles, for instance, ranked 373rd and 375th out of 405 in the World Bank’s 2023 Container Port Performance Index. Considering these two ports handle about 29% of all containerized international waterborne trade in the US, their low efficiency is a significant concern.

As we continue rolling out our cost model, now in its second month, we’re providing detailed insights into the gross variable cost of producing a new western softwood GMA A-grade stringer pallet across six key metro hubs. This model highlights a side-by-side comparison of costs depending on whether #3 or #4 grade lumber is used in production.

The model is based on the availability of softwood lumber and takes into consideration the delivery cost from the mill to the pallet facility, which is partly why we see a lower cost in Seattle and a slightly higher cost in Chicago.

We must caveat that while certain manufacturers will have lower costs due to a higher utilization of automation, these are our estimated averages for each of the metro hubs.

Moreover, the total cost for each hub is calculated by adding the lumber cost and labor cost, which are labeled for each metro hub, alongside a nail cost that is uniform across the country, and miscellaneous costs, including smaller items such as gas, electricity, paint, and staples.

We’ve observed steady price increases across all six metro hubs, reflecting the rise in lumber prices seen in October and November. This trend, potentially a harbinger of what’s to come in 2025, offers some welcome relief for pallet manufacturers.

As Fastmarkets expands its coverage of the pallet market, we invite feedback on our analysis and insights. Contact antonio.gallotta@fastmarkets.com with comments.

Pallet industrial production index being propped up by recycled pallets

FRED data indicates that the pallet industrial production index declined by 1.1% from September to October 2024. Though we’d likely expected a lower index level given the current market conditions, it’s important to remember that this index aggregates both new and recycled pallets—recycled pallets continue to support higher overall numbers.

The subdued production of new pallets reflects producers’ reluctance to increase output. Elevated supply levels across the country have kept prices suppressed, prompting manufacturers to wait for inventories to decline before ramping up production.

Pallet wages begin to rise again

Despite pallet wages having stayed relatively stable since 2023, another small surge in labor costs can be seen more recently, with wages rising 3.6% from June 2024 to September 2024 (October’s figures haven’t been released yet). However, this pales in comparison to the wage growth seen during the pandemic.

The slower growth in pallet wages provides some relief to pallet producers, who previously faced reduced margins due to skyrocketing labor costs following the record-high pallet prices during the pandemic. Labor shortages and wage pressures have also accelerated the adoption of automation among manufacturers, with automated pallet nailing machines and dismantlers becoming more widespread.

Pallet producer price index sees first positive gain in two years

This graph of the Pallet Producer Price Index shows the gradual decline in pallet prices since the highs of early 2022. The peak pricing followed a period of extreme volatility driven by a combination of pandemic-era home renovation spikes, increased demand, and sawmill disruptions. Prices rose approximately 60% from May 2020 to April 2022.

The recovery process has been slow, reflecting a return to stable supply and adjustments by producers who initially ramped up capacity during the highs of Covid which created a supply glut. The fall in prices has been prolonged and as can be seen by the rate of change on the right, it has slowly plateaued and October 2024’s figures showed its first rise in pallet prices since April 2022, partly attributed to the mill closures seen earlier this year starting to effect.

Framing lumber’s rally signals optimism for low-grade prices in 2025

As we’ve mentioned in previous editions and exemplified by the two indices having a high correlation, we also incorporate framing lumber as it’s long been a leading indicator of low-grade lumber.
Framing lumber prices rallied in October as supply tightened due to Hurricane Helene disruptions, declining Canadian production, and disaster repair activity boosting demand. The Random Lengths FLCP averaged $397 per MBF, the highest since April, and is expected to rise further in November before softening in Q1 2025. Southern Yellow Pine prices are already correcting as supply rebounds, while Canadian mills face rising duties, projected to reach 30% by 2025, adding financial strain. Despite short-term volatility, 2025 looks brighter, with the FLCP forecasted to climb to $441 per MBF, its highest nominal level since 2018 (excluding 2020-22).

The rise in framing lumber prices is expected to drive an uptick in low-grade lumber prices, with market conditions in 2025 projected to be significantly more favorable than the past two years. This outlook is underpinned by anticipated market tightness in early 2025, particularly if a prolonged ILA strike disrupts pallet sourcing, as well as a gradual easing of interest rates. However, the pace of rate reductions may be slower than previously expected due to recent spikes in 10-year Treasury yields and mortgage rates driven by tariff uncertainty. As a result, low-grade lumber prices are forecasted to reach $312 per MBF in 2025.

Housing market steady, but rising rates add uncertainty

Housing starts dipped slightly in October, but multifamily housing starts rebounded by 10% to 340,000 after a sharp 22% drop in September compared to July. Despite this rebound, multifamily starts averaged 340,000 over the August-October period, down 4.2% from the previous three months and 15% below the year-ago pace, while single-family starts showed a modest upward trend, averaging 1.0 million units annually—6.4% higher than the prior three months and 4.5% above last year. Permits remained steady, signalling solid activity in the final months of 2024.

This uptick in single-family construction lifted the NAHB HMI in November to 46, driven by a six-month sales outlook rising to 64. Confidence among homebuilders likely grew after the clarity of a Trump re-election, with regulatory reform expectations offsetting the limited federal role in boosting home construction. However, as mentioned above, the Trump victory has unsettled the bond market, driving sharp increases in the 10-year Treasury yield and mortgage rates due to tariff uncertainty, as well as stricter immigration enforcement, and shifts in fiscal policy. This market turmoil, alongside the Federal Reserve’s cautious stance on rate cuts, has prompted a re-evaluation of housing market projections.

Want to learn more about the pallet market and the factors influencing it? Sign up to the newsletter to be the first to see our prices and access our insights and analysis.

The post Uptick in holiday and Q1 2025 demand balanced in East by lower-priced Southern Pine appeared first on Fastmarkets.

Trade policy: Tariffs and import dynamics

Trump has signaled a willingness to re-engage with aggressive tariff strategies, potentially imposing tariffs of 10%–20% on all imports and 60-100% on Chinese goods. Drawing from his previous term, where nearly a year passed between initiating a case against China and enforcing tariffs, manufacturers in industries that are likely to be affected should have plenty of time to ready their supply chains, even if this intermittent period is shortened this time round due to a more organized and coherent political apparatus surrounding Trump for his second term.

As all economists like to point out, tariffs have historically pressured trade costs upward, causing international shipping rates to surge as US businesses frontload imports in anticipation of increased fees. Higher shipping rates will also be exacerbated at the start of 2025 with the Lunar New Year and the deadline for the ILA strike on January 15th where both sides are no closer to reaching an agreement.

Although Trump has previously stated that “American workers should be able to negotiate for better wages, especially since the shipping companies are mostly foreign flag vessels,” if the strikes go on for too long then it would come at odds with his staunch stance of high economic growth, so industry players should remain alert to signals on what his position is on these strikes now that he’s been elected.

For the pallet industry, a frontloading period – due to impending tariffs and an unresolved dockworkers’ negotiation – could mean an early-year boost in pallet demand as importers rush to stock up before tariffs take effect. However, any prolonged tariff imposition would likely lead to a decline in pallet demand as the cost of imports deters volume. That being said, once Trump has signaled which products will be tariffed coming into the US, the pallet manufacturers that supply to industries benefitting from this protectionism stand to see a rise in demand for their pallets.

Domestic manufacturing and supply chain nearshoring

Increased tariffs on China and other trade adversaries may accelerate the trend of supply chain nearshoring, with a significant shift toward Mexican manufacturing already evident in recent years. Mexico now ranks as the leading supplier of US imports, thanks to proximity and the relative trade benefits under the USMCA agreement. As Trump seeks to renegotiate the USMCA, US pallet producers could see mixed impacts: on one hand, reduced reliance on overseas suppliers could spur US manufacturing, but on the other, it may disrupt cost structures as tariffs reshape supply chain decisions.

Housing and immigration policies: Impact on labor and materials demand

Trump’s housing policies, aimed at opening federal lands and reducing regulatory barriers, reflect an ambitious plan to spur construction and housing availability. However, the availability of federal land often doesn’t match regional housing needs – as the areas where most of the federally owned land is situated are not where people typically want to live. While loosening regulations could potentially reduce construction costs, the effect on pallet demand may be constrained by geographic limitations and the feasibility of mass housing expansion in desired areas.

Meanwhile, the president’s stance on immigration could indirectly affect the pallet sector. A significant reduction in immigration, and potential deportations, could tighten the labor market and raise wage pressures. Given that wages in the pallet sector have recently cooled after a prolonged increase since 2020, we’ll likely see another reacceleration in wage growth and difficulty sourcing labor should Trump implement his immigration policies touted on the campaign trail. Nevertheless, mass deportations will likely face opposition from business leaders wary of labor shortages and cost increases, suggesting that any policy changes in this area may be moderated.

Economic indicators: Inflation and interest rate uncertainty

Higher tariffs, coupled with Trump’s proposed tax cuts, are expected to put upward pressure on inflation. The resulting increase in consumer prices may be manageable if the Fed continues with rate adjustments, though mortgage rates have already climbed in anticipation of deficit-driven inflationary effects. The combination of inflation risks and higher interest rates could affect sectors tied to residential construction, particularly in high-cost regions, potentially softening pallet demand from the construction industry.

However, there is reason to believe that tariffs could be used as a negotiating tool rather than implemented in full force. Trump’s previous administration demonstrated a pattern of using tariffs strategically, suggesting that trade concessions from partner countries may ultimately alleviate some inflationary concerns.

With all this being said, where interest rates land is the main gauge that those in the pallet industry should keep an eye on. Many economists, including JPMorgan chief US economist Michael Feroli, suggest that the broader economic outlook for 2025 may not be significantly altered by a Trump presidency. While potential drawbacks from renewed tariffs could impact trade costs and demand, these may be counterbalanced by positive market sentiment and economic activity spurred by anticipated deregulation efforts. The net effect will depend on how these policies interact with prevailing economic conditions, particularly inflation and consumer spending, which influence both demand and operational costs for the pallet sector.

In conclusion, a Trump presidency is likely to bring mixed effects to the pallet industry. While some aspects may create temporary boosts in demand, such as frontloaded imports, the longer-term outlook hinges on whether tariffs and domestic policy measures stabilize.

Interested in more Fastmarkets analysis of the pallet market? You can sign up to our newsletter to get early access to our pallet price data and analysis. Speak to our team and find out more today.

The post How does a Trump presidency change the outlook of the US pallet market? appeared first on Fastmarkets.

Amid localized challenges, broader market dynamics further complicate the outlook for western softwood pallet producers. The sector faces significant supply chain constraints, driven by high import volumes and logistical bottlenecks.

As the industry braces for seasonal strains and anticipates shifting market conditions, the response to these pressures will be crucial in shaping the future of softwood pallet production in the region.

This pallet pricing newsletter includes:

• Insights into changing regional prices compared to September’s assessments
• The impact of the 2024 holiday season, which is set to be the busiest since 2021
• Expert analysis on changes in pallet production and wages
• How macroeconomic headwinds are impacting the market

Interested in early access to our prices and analysis? Sign up to the pallet prices newsletter to be the first to receive them.

Pallet trading prices

Western softwood US pallet manufacturers continued to face steep competition from alternative species and an oversupplied used pallet market. 

Fastmarkets newly assessed Pallets, western softwood, GMA A-grade delivered Seattle at $11.00-17.00 per pallet on October 30. This was unchanged from recent weeks. However, the other major market in the western softwood producing region, San Francisco, was another story. 

Fastmarkets assessed Pallets, western softwood, GMA A-grade delivered San Francisco at $10.50-16.50 per pallet on October 30. This assessment reflects a -$0.75 decline to the low and high of the previous range.

While local low-grade lumber prices have remained fairly stable for the last month, competition from alternative species and a competitive used market resulted in some manufacturers lowering prices. Good quality used B-grade pallets and excellent quality block pallets were offered from $8-10 in the downtown San Francisco area.

Although most producers did not report changes in their assessments of the market, comparable erosion in asking prices were observed in Chicago, Los Angeles, and Dallas-Fort Worth, with comparable B-grade and off-spec pallets available at competitive prices below recent western softwood basic unmodified GMA Grade-A 48×40 pallet rates.

At present there is ample availability of new western softwood pallets on the market for prompt delivery. Low-grade western softwood producers reported that while agricultural and manufacturing purchases have picked up slightly in the last month – they have encountered resistance from pallet producers who are hemmed in by current market conditions.

Further complicating matters, tightness in the green Fir market has pushed more western softwood pallet producers to the dry market. This corresponds with reports from dry low-grade manufacturers who recently noted a slight uptick in sales volumes to the pallet sector.

As Fastmarkets ramps up its coverage of the pallet market, we invite feedback on specific pallet-related items for future reports. Contact ian.templeton@fastmarkets.com with comments or to contribute future pricing information.

New cost model for GMA A-Grade stringer pallet

We’re delighted to announce our new cost model detailing the gross variable cost for new western softwood GMA A-grade stringer pallet across six key metro hubs, with a side-by-side comparison of what it would cost depending on whether you use #3 or #4 grade lumber to produce the pallet.

The model is based upon the availability of softwood lumber and will factor into consideration the delivery cost from the mill to the pallet facility, which is partly why we see a lower cost in Seattle and a slightly higher cost in Chicago.

We must caveat that while certain manufacturers will have lower costs due to a higher utilization of automation, these are our estimated averages for each of the metro hubs.

Moreover, the total cost for each one is reached by adding the lumber cost and labor cost, which are labeled for each metro hub, alongside a nail cost which is uniform across the country, and miscellaneous costs which include smaller items such as gas, electricity, paint, and staples.

Holiday season supply chain strain

The holiday season is shaping up to be the busiest since 2021, driven by record spending forecasts and a projected 3% increase in holiday sales from the year prior, according to the National Retail Federation. Despite a temporarily settled labor dispute on the East and Gulf Coasts, supply chain challenges persist, with high import volumes redirected to the West Coast ports like Los Angeles and Long Beach.

These diversions, coupled with delays in freight rail, have led to increased dwell times—up to nine days in some cases. As containers wait for rail capacity, companies may incur higher logistics costs, often turning to trucking to bypass bottlenecks, driving up overall transportation expenses. For the pallet market, this could translate to increased prices as businesses prioritize pallets for stockpiled goods and anticipate future disruptions. 

The situation is further complicated by a reduction in trucking capacity, as company exits have outpaced new additions since October 2022, according to data from the Federal Motor Carrier Safety Administration. With this loss of trucking firms, bottlenecks are expected to worsen as freight struggles to move efficiently.

Industry players, including DHL, are advising clients to reroute rail-bound freight back to the East Coast. Moreover, as the International Longshoremen’s Association continues to hold firm on automation issues, and with a critical January 15 deadline looming, there’s potential for renewed strike actions that could exacerbate these logistical challenges into the new year.  

The resulting constraints may create a shortfall of pallets on the West Coast, as increased demand and limited capacity put pressure on suppliers and lead to higher pallet prices. Pallets from US international trade arriving through container have increased steadily since March 2024 as seen below, in part due to provisions made by logistics managers to get goods in before the October strike deadline.  

Pallet industrial production index decline 

FRED data shows that the pallet industrial production index has fallen 5.9% from July 2024 to September 2024, in line with the volatility we’ve seen in this index since the start of 2024, although still relatively high for the figures seen in the last 18 months. 

This is reflective of conflicting forces in the pallet market of large manufacturers with a strong network of facilities having steady production, but smaller manufacturers that have struggled in the face of smaller margins due to low prices and higher costs exiting the market. 

Pallet wages remain stable in 2024

With respect to wages in the pallet industry, their growth outpaced the growth of wages in the manufacturing sector at large from the pandemic up until 2023, though since then there has been relatively little increase in pallet wages which has allowed manufacturing wage growth to catch up. Pallet wages grew by 30% from March 2020 to September 2023 whilst overall manufacturing earnings grew by 18% over the same period, but since then wage growth has been 0.3% and 5.1% respectively. 

This is significant, as it offers some relief to pallet producers who endured sharply reduced margins following the decline from record-high pallet prices seen during the pandemic, which we in part mentioned above. Though wages have largely levelled since 2023, there has been a steadily upward trend in wages since March 2024 so wages figures in subsequent months will be keenly watched. 

As Fastmarkets expands its coverage of the pallet market, we invite feedback on our analysis and insights. Contact antonio.gallotta@fastmarkets.com with comments.

Hurricane impact on lumber and pallet markets

Hurricane disruptions across the US South have heightened market tension, with both temporary curtailments and some permanent or indefinite mill closures affecting lumber supplies.

With inflation easing, interest rates have finally stabilized and are expected to trend downward through year-end as the Federal Reserve adopts a more balanced approach to its dual mandate of price stability and full employment.

This shift could serve as a catalyst for growth in single-family housing construction, reversing recent momentum losses, and easing financing constraints in multifamily development. Assuming inflation and interest rates remain favorable, the foundation for a demand recovery in lumber appears strong. 

This is a notable tailwind that will feed downstream into the pallet industry because, as noted in the first edition of the newsletter, framing lumber has long been a leading indicator for low-grade lumber which is primarily used in pallet manufacturing. 

Pallet producer price index sees encouraging signs

The Pallet Producer Price Index data indicates that while prices continue to decline from their 2022 highs, the rate of deceleration has eased in recent months—an encouraging sign for the industry. The percentage change is steadily approaching positive territory, signaling potential stabilization. 

This trend aligns with the rebounding housing market, which is expected to have positive ripple effects across the lumber industry. As reflected in the forecast above, we anticipate a steady increase in prices heading into 2025, supported by renewed demand from housing and construction sectors. 

September housing starts remaining steady

Housing starts remained relatively steady in September, with minimal change from the previous month. According to the Census Bureau, housing starts reached 1.354 million units (seasonally adjusted annual rate), a slight 0.5% decrease from August. Notable revisions were made to prior months, with July and August figures collectively revised up by 30,000 units from the August report. Regionally, the Northeast saw the largest growth, with starts increasing by 58% over the previous month.

Overall in the US permits dropped by 2.9% from August, indicating a likely slowdown in October, especially with the disruptions caused by Hurricanes Helene and Milton.

Want to learn more about the pallet market and the factors influencing it? Sign up to the newsletter to be the first to see our prices and access our insights and analysis. We provide a range of market intelligence, including short-term forecasts, price data and market coverage to keep you one step ahead of the market. Speak to our team and find out more today.

The post New western softwood pallets struggle against alternative species and used market appeared first on Fastmarkets.

While the sector continues to recover from the retrenchment in 2023, new opportunities and challenges are emerging, from evolving market dynamics to the impacts of trade and labor disruptions. 

Our first pallet pricing newsletter includes:

• Insights into the headwinds impacting pallet trading prices, including the Federal Reserve rate cut and a pick up for specialty pallets
• Crucial context into the rate of pallet production in recent years and how the volatility in the market has impacted prices
• A new pallet supply measure which tracks pallets flowing in and out of the US market via containerized trade
• Our short-term forecast for the market

Interested in early access to our prices and analysis? Sign up to the pallet prices newsletter to be the first to receive them.

Pallet trading prices

Recent trends held this month as the bulk of unmodified or unenhanced GMA pallets in the Seattle market traded in an $11.00-13.00 per pallet range with premium GMA pallets trading in the $15.00-17.00 range. Market participants continued to report that these ranges have remained in place for months.  

Producers reported persistently underwhelming production of new softwood GMA A-grade 48×40 pallets with ample availability for prompt delivery. Some sources reported a slight uptick in agricultural sector purchasing and some specialty manufacturers noted a pickup following the rate cut decision. However, the new GMA pallet sector continues to lag. Most producers report that they do not expect a significant change this calendar year.  

In most key delivered markets, mills continued to struggle against ample availability of $5.00-7.00 “good to average” condition used pallets. Market participants reported that used pallet inventories were diminishing, but estimates of these inventories were wide ranging. 

As Fastmarkets expands its coverage of the pallet market, we invite feedback on specific pallet-related items for future reports. Contact ian.templeton@fastmarkets.com with comments or to contribute future pricing information.

A volatile market

Pallet production has been a highly volatile market over the last decade, but it is showing signs of life after retrenchment in 2023.

According to FRED data, the production index for pallets rose 18% from March 2020 to its highest point in December 2021 before steadily falling again once the pallet market became saturated. However, more recently, the production index has risen by 10% from July 2023 to July 2024.

That said, it should be noted that the methodology for this index does not differentiate between new and recycled pallets. Market indicators including industrial hardwood and low-grade softwood lumber demand point to the conclusion that most of this increase in pallet production has been on the recycled side of the market rather than the new side. 

The recent weakness in new pallet production means that the stock of existing pallets in use and on the market will degrade in quality on average. The condition of pallet cores will deteriorate and more pallets reach the end of their useful life. Pallet recycling activity will wane and the currently low prices will creep up. Eventually, prices will increase enough for new pallet production to climb again to meet market demand. 

Prices continue to ease

The US Bureau of Labor Statistics (BLS) reported that the pallet producer price index (PPI) rose 60% from March 2020 to April 2022.  

The fall from the highs of April 2022 has been far slower compared to the rapid price spike seen during the pandemic, with this downturn being more prolonged than many smaller pallet manufacturers have been able to weather as this has greatly diminished margins. Indeed, many closures have been reported due to low pallet prices and high wages becoming unsustainable. This reduced supply capacity will in turn create volatility in the medium term. 

However, we envisage that the manufacturers able to weather the perfect storm of a supply glut, low prices and high wages stand to gain significant market share. While the industry has been torrid lately, the largest players with reliable networks and economies of scale have seen sizeable growth. For example, PalletOne, the USA’s largest pallet manufacturer, reported a 10% increase in unit sales in Q2 compared to the year before, whereas industrial production in the pallet industry rose 6% during the same period. 

Pallet producers have also contended with higher labor costs than other manufacturing sectors. According to the BLS, wages in the pallet industry grew by 30% from March 2020 to September 2023 whilst overall manufacturing earnings grew by 18% over the same period.

Wages in the pallet industry have plateaued since then but continue to be a pressure point, with the National Wooden Pallet and Container Association (NWPCA) producing a report where 74% of manufacturers identified attracting and retaining a quality workforce as their top challenge. 

Grade lumber price trends lead low-grade ones 

Framing lumber has long been a leading indicator for the low-grade lumber used to manufacture pallets, with a correlation of 0.97 between 2019 and 2024.

This partly explains the pricing volatility we saw during the pandemic, with the framing lumber used for residential construction soaring once the housing market picked up at the end of 2020 and people started looking for more space outside of big cities, buttressed by more disposable income and suppressed interest rates.  

As a result of the way framing lumber is made in sawmills, low-grade lumber will always be produced as a by-product and thus explains their correlation. The low-grade lumber composite price peaked at $1018/MBF in March 2021 due to the high value of framing lumber during the same period, seeing the same subsequent fall and rise before the more gradual easing seen since the end of 2022.

As our forecast shows, we expect the price of both framing lumber and low-grade lumber to steadily increase into 2025. 

US housing starts set to bounce back

As low-grade lumber is closely related to framing lumber, housing starts are a key statistic for the pallet market and are closely watched as a harbinger.

Since the Fed began raising rates, the housing market has remained subdued. Home prices have remained elevated and those who locked in low mortgage rates at the start of the pandemic have had little incentive to buy.  

July 2024 had the lowest housing starts since June 2020, partly due to low demand but also as a result of poor weather conditions seen across the country such as record-breaking heat across much of the West and Hurricane Beryl in the South, the two regions that account for the vast majority of new home construction.

August 2024 saw a strong rebound in response to the low housing starts seen the previous month, and we expect this rebound to continue heading into 2025 as the low mortgage rates from the pandemic begin to expire and with the Federal Reserve beginning their rate-cutting in September 2024. 

Trade as a key metric

Despite being a smaller section of the overall pallet supply, the net inflow of pallets rose from 0.9 million in March 2020 to 8.7 million in July 2022, exacerbating the oversupply of pallets in the US and further driving down the price of pallets.

They’ve begun to surge again in 2024 as imports have risen while exports have remained relatively constant and this will likely continue to be the case for the remainder of 2024 due to the busy imports period in the lead up to Christmas, and as logistics managers tried to rush goods in before the potential dockworkers’ strike on October 1.

While the exact length and severity of the strike is tough to predict, if it does come to pass it could lead to a surge in pallet prices in some regions as they rush to fill the gap in the pallet pool that the strike would cause.  

At the time of writing, the International Longshoremen’s Association (ILA), which represents 45,000 dock workers at three dozen U.S. ports from Maine to Texas and handles almost half of the nation’s ocean trade, was still in a deadlock with the US Maritime Alliance (USMX). The dispute stems from the USMX’s insistence that ports begin to automate which would lead to some job losses, as well as reports that the ILA are proposing a 77% pay increase over the next 6 years of their contracts.  Repercussions have already begun to be felt at ports on the West Coast, with the West’s dockworkers having already settled their contracts the year before and thus will pick up some of the trade volume from the East Coast. 

Concerns of a bottleneck on the West Coast have grown as supply chain managers begin to reroute their goods to ports on the West Coast. California’s two largest ports, Los Angeles and Long Beach, saw their combined inbound container volume surge 47% in July from the same month last year and rise another 3% from July to August, with Long Beach reporting its best month on record for imports. However, given that ILA ports make up 43% of US imports, according to Freightos, West Coast ports won’t be able to handle all the additional goods being redirected. 

As Fastmarkets expands its coverage of the pallet market, we invite feedback on our analysis and insights. Contact antonio.gallotta@fastmarkets.com with comments.

Another consideration is how the White House might respond to a strike. The White House has so far ignored pleas from scores of trade groups to intervene, but this may change once the strikes get closer due to the effect this would have on the economy.  

Looking further ahead to how the election could affect the pallet supply, we envisage that if a Trump presidency occurs we can expect a surge in imports between November and January in anticipation of the tariffs he has said he’ll impose, potentially causing more price volatility for pallets as closures for sawmills begin to mount.

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