You are probably tired of hearing all the negative news regarding the economy and how the pandemic has affected everything.
Our previous articles mentioned both inflation and the impending recession that the ongoing pandemic has caused. We have addressed many things regarding these topics in correlation to the pallet industry.
In this article, we will discuss the lumber industry and how the pandemic has shaken up the market.
It should come as no surprise that pallets and lumber are closely tied together. With wood being a key renewable resource, wood base pallets are a major product. While there are other materials such as plastic or metal, surveys have found that many consumers prefer wood.
Last year pallet prices surged due to an unpredicted increase in demand. This was in part due to a demand that sawmills were unprepared for. Towards the beginning of the pandemic, many consumers had an increased demand for wood products. With everyone being in quarantine many people began DIY, home renovations, and other construction-based projects.
This would not have been such an intense factor in lumber change if sawmills successfully kept up. Mills, like many other industries, were forced to cut back drastically. According to npr.org "single-family home construction jumped 12%... remodeling climbed 7%... sawmill output rose just 3.3%".
This failure of supply to meet demand then resulted in a price surge. "In April of 2020 lumber was approximately $349 per thousand board feet. In May of 2021, the price skyrocketed to $1514 per thousand board feet" according to the trade journal Fastmarkets Random Lengths.
While the wood prices have been staggeringly high for the past 2 years, there is some good news. On Wednesday, June 1st of 2022 lumber prices fell 7%.
One would think the reduction in the price of lumber will be beneficial for pallet manufacturing companies. With less demand, supplies at mills have been piling up. And, in any other climate, this would work in favor of pallet suppliers and manufacturers. Unfortunately, many pallet companies have overstocked expensive lumber.
As mentioned in some of our other articles the pandemic has affected every form of the pallet industry. While it would be nice to give good news. There is only so much that can be done. As pallet business owners we have to stay up to date with market research information and constantly update business strategy and be willing to pivot if necessary.