WOODEN PALLET PRICES REMAIN STEADY EVEN AS HARDWOOD LUMBER MARKET SLUMPS

Submitted: Bay Wood Products

(ROBERTSDALE, Ala.) May 21, 2019 Across the U.S. this spring, the hardwood lumber market is in an unseasonable slump thanks to factors such as severe weather and decreased demand from foreign consumers.

Jimmy Wilson, founder and president of Bay Wood Products in Baldwin County, Ala., often gets questions about why wooden pallet and packaging prices haven’t trended downward, too. For 25 years, Bay Wood has manufactured wood pallets and crates for a variety of industries, using softwoods such as southern pine, abundant in Alabama.

"There’s not one simple explanation,” Wilson said, "but rather a multitude of reasons the price of low-grade wood used to make pallets and packaging products remain stable or even cost more in today’s market.”  (Photo: Jimmy Wilson)

Since at least mid-2018, pine (softwood) and red oak (hardwood) markets have been depressed. The high grade continues to stay depressed because the demand from its biggest consumer, China, has decreased as the foreign nation experiences a housing crisis and downturn in its economy. 

In the U.S., extreme weather conditions this year, from unprecedented flooding and winter storms, have impacted the availability of lumber. Less wood can be harvested and delivered to sawmills in a timely manner. Mills that can’t get enough hardwood logs often slow production. 

"High grade and low-grade markets sometimes run in the opposite direction," said Chaille Brindle, publisher of the Pallet Profile Weekly Report. "Right now, most low-grade hardwood continues to suffer from poor supply due to weather constraints. Also, there is significant uncertainty due to the pull back from China, which could further depress supply. This short fall in hardwoods has pushed a lot more pallet producers to softwood, creating more competition for low-grade softwood. In most cases there is less low-grade material on the market over the last few years as sawmill technology has improved optimizing yield."

"The sawmill industry is heavily dependent on weather conditions,” said David Caldwell, a partner at the Hardwood Market Report. "I’ve been in business 35 years and I’ve never seen such a severe weather season. There has been a significant reduction in (hardwood lumber) products because of the weather.”

And when the mills are running at full speed and able to get hardwood logs, they rely on producing and selling high-grade lumber for the bulk of their business. Additionally, recent technological advances in equipment used by southern pine lumber mills reduces the amount of low-grade material being produced, adding to the supply pressure that supports the higher cost of material for pallets and industrial uses.

"They don’t come to work to make low-grade lumber,” Wilson said. When the high-grades products are created, the low-grade wood is a byproduct. "Therefore, when the supply of logs is low and the market for high-grade is depressed, the result is that much less high-grade and low-grade are created because they come from the same logs.”

Another factor: Many industries that would typically use low-grade hardwoods are willing to pay more when supplies are low. When those industries, including railroads and pipeline construction, pay more for the same product, it forces more wooden pallet manufacturers to turn to softwoods such as southern pine.

"That increases demand for the low-grade soft lumber which makes up the largest part of wooden pallets and other packaging materials made by our company," Wilson said. "The increased demand, as you can imagine, can make prices remain steady and even rise for low-grade southern pine lumber."

About Bay Wood Products 

Bay Wood Products is a full-service manufacturer of wooden pallets, rough-cut lumber, dunnage and crates with a recent expansion into the biofuel and mulch markets. The company is one of the largest single-site manufacturers of wooden pallets in Alabama and Mississippi, specializing in customer-designed solutions to wood packing material needs. Since 1994, the company has crafted pallets of all shapes and sizes and specifications for big industry, large petroleum companies, and chemical companies, shipping agencies, manufacturers, farmers of sod and other crops. For more information, call 251.960.1108 or visit bay-wood-products.com.









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