The pandemic-related surge in wood prices has had a dramatic impact on the economy. The surge helped trigger massive price hikes in the housing market and came to symbolize the rampant inflation many economists feared would accompany an economic recovery. It has also driven up some supply chain costs to unprecedented levels.
The surge in prices was caused primarily by a lack of cut lumber, which is wood produced by sawmills for use in everything from building houses to making wooden shipping pallets. In the early months of the pandemic, sawmill operations all over the United States and Canada shut down. These shutdowns were both for safety reasons and in anticipation of a lack of demand for cut lumber in a pandemic economy.
The sawmill industry was only one of many industries that underestimated stronger-than-expected consumer demand. Millions of Americans stopped traveling, staying at hotels, and eating in restaurants. Many focused instead on their own property, adding decks, repairing fences, even building treehouses. The demand for professionally built homes grew dramatically as well, fueled by low interest rates and the desire of many Americans to live farther away from crowded, pandemic-stricken cities.
This increased demand coupled with the lack of cut lumber supply caused lumber prices to soar, from $349 per thousand board feet in April, 2020 to $1,514 this past May, according to trade journal figures. This is turn has helped spur a surge in home prices. The National Association of Home Builders estimates that the median price of all new and existing homes sold in the United States rose to $320,000 in the first quarter of 2021, up from $280,000 in the first three months of 2020.
Skyrocketing Wood Pallet Prices
As house hunters were confronted with a more expensive market, soaring wood prices contributed to daunting supply chain costs for logistics companies. Businesses relying on wood pallets to transport products and goods may have been hardest hit. Industry groups warned in May that prices for wood pallets were up 400 percent from last year. These costs have been driven by a lack of cut lumber supply, ever-increasing consumer demand, and a shortage of drivers and trucks needed to transport pallets for supply chain use.
Wood prices have dropped significantly since May, as increasing vaccine rollouts allow Americans more leisure options outside their homes. But shipping companies continue to pay premium prices for wood pallets while being hampered operationally by their scarcity and other factors. Like many other industries, the sawmill industry is struggling to bring back the workers needed to produce boards for wood pallets. A lack of transportation capacity has led to many of these pallets sitting idly in warehouses and fulfillment centers for days at a time as bottlenecks build up throughout supply chains.
There are simply not enough affordable wood pallets to meet the volatile, in-time demands of an economy still struggling with the effects of a global pandemic. Logistics companies will eventually be forced to pass on supply chain costs associated with these pallets to consumers unless alternatives can be found.
Businesses may find it more cost effective to partner with a plastic pallet pooling company that manages a pallet supply on their behalf. The right partner would oversee a supply of readily available digitally tracked plastic pallets that could be shipped to other locations when not in use. The pallet company would replace and recycle plastic pallets as needed—not only are plastic pallets about four times more durable than wooden ones, but they can be remade into new pallets at end of their lifespans. Plastic pallets are also 35 percent lighter than wood pallets, which helps reduce a vehicle fleet’s fuel consumption and its level of harmful emissions.
By choosing strategic partners that lower fuel costs and eliminate expenses associated with managing expensive wood pallets, companies can reduce their Total Cost of Business (TCOB). This allows them to stay competitive in an economy where high prices for wood products continue to drive up supply chain costs.
Companies seeking to reduce supply chain costs use pooled iGPS plastic pallets for all their shipping needs. Our pallets are ideal for all types of warehouse automation and help reduce your Total Cost of Business. For more information, contact us at 1-866-557-0047, email a specialist at [email protected], or visit our contact page.