There is no question that lumber and labor shortages will continue through 2021. These shortages are also affected by Covid-19, and now federal aid programs are discouraging qualified workers from returning to work. Until the supplemental Federal and state income is eliminated, it will be difficult for many businesses to achieve their total capacity needs in employing workers. There will be continuing delays in many products and services.

There appears to be an abundance of softwood timber in the South and Southeast. However, the current problems relate to the challenges in getting more processing equipment, mills, and labor into the region. As production rates increase in this area, timber prices would revert to more normal pricing. Unfortunately, I think high lumber prices will continue through 2021, and we hope to see a return to normalcy in the summer of 2022.

Concerning our tooling business, we work longer hours and are increasing orders of certain products and steel to meet the increased requests from our customers. We continue to see manufacturing facilities ask us about more efficient tooling and tooling to turn their scrap into a profitable product. Anything that can help reduce their stressed need for additional hard-to-find employees.

Lack of supply in the marketplace has caused increased cost in every sector from cores and nails, to labor and new lumber. We are seeing many customers pull away from the roller coaster ride of new lumber prices and try to maintain cost controls by switching to recycled pallets. With ongoing government stimulus, we are finding it harder than ever to recruit labor. Customers are eager to get back to work after a year of shutdowns, covid regulations, and ongoing supply chain difficulties.

Pallet Systems and Recycling strives to be as green as possible. We are maximizing lumber yields by switching customers to other grades and sizes of recycled pallets. We have moved away from new lumber and shifted our focus to become a 100% recycled green operation.

Pallet Systems and Recycling has been blessed to have some of the best customers in the world. We are open and up front with them with respect to lead times, costs, and any potential production delays. We are in a unique marketplace and open communication with our customer base has been instrumental in the success we have had.

We see market conditions lasting throughout 2021.

There seems to be a lot of panic going on. Demand has picked up and supply is limited causing major disruption in the supply chain. It is difficult to find people and you see help wanted signs everywhere. Paying people that can work not to work was a poor decision.

We are totally integrated for about 75% of our supply. It is the 25%, relying on sawmills and cut stock suppliers to fill those other needs. Chasing that 20% due to limited supply has resulted in a bidding war for raw material. It started when the KD pine market heated up, putting pressure on whatever hardwood lumber was available. Lack of putting new rental pallets in the pool due to the price of KD pine lumber had to be another contributor to putting pressure on the hardwood supply and pallet recyclers.

What are you telling your customers? We are doing our best to keep our long-term customers in supply. There can be delays due to supply chain issues and outside trucking that we have no control over. Due to the volatile market, we are looking at pricing monthly, communicating with customers and adjusting appropriately. Price has nothing to do with our ability or inability to do more. We are not chasing temporary high-priced orders.

I believe the market will swing with the price of softwood. I am of the opinion it started there and will retreat in some manner at some point in time. I feel we are going to see much of the same at least until late 3rd or 4th quarter and maybe all year. If demand and prices stay high, the whole dynamics of pallet manufacturing might be different in the future.

Lumber sky rocketing and labor shortages/rates on the rise call for some intuitive planning and creative, out of the box, ideas. At Go Fast we are experiencing a surge in customers looking to replace slower outdated equipment with something newer. With the shortage of labor and rising labor costs, every hour counts. Looking into equipment replacement with something that gets 25-50% more done in an hour not only pencils the ROI but allows for moving employees to other stations. We are helping our customers look are these work stations and analyze how they can get more with less. Often we are able to break down the operational costs and find savings in both labor and maintenance.

As a company we are holding the supply chain curve as best as we are able. When the pandemic hit we saw the shortages early on. We have aggressively been buying our supplies ahead in bulk at an attempt to keep machinery costs down and completion times on track.

What are you telling your customers? When has it ever been a better time to look at your operations and see how to best optimize. If not now when? How can you get more with less? Let us help break down your work cells and look at the cost of operation. This will help determine where equipment upgrades are most needed. In doing this it will aid getting through the crazy market we are finding ourself entangled in.

What are you are seeing during these extraordinary times? Covid has at least one positive effect, it is an extraordinary accelerator of trends. The entire timber sector needed to recover decent prices in order to live and finance investments. it would have taken 10-15 years to get there without Covid. During this crisis, we have seen several factors, namely:

• Wood pallets are essential.
• Wood is a raw material, just like iron, gas or oil, with price variations that can also be significant, or even speculation => the market was not used to this kind of action, as the price of wood has always been fairly stable.
• The consumption of wood is exploding throughout the world, promoted in various sectors such as construction.

What is your business doing in response to the shortages? We communicate a lot with our customers and everyone understands that we need an additional budget so as not to be in short supply. We are also working with our customers on the eco-design of our pallets to reduce the volume of timber. We have developed new partnerships with new suppliers to expand our sources of supply. We have also made external acquisitions at sawmills to reduce our dependence on third parties.

What are you telling your customers? The prices now are not so far from those before the 2000’s financial crisis. The whole world purchased wood for 15 years very much below its value, it was an inevitable catch-up to preserve our industry and promote the best sustainable materials. Moreover we remind our customers every day that using a pallet just once is not responsible and that we must work for a better circular economy and reuse pallets.

We started a "Wood Market Analysis" every month in order to inform our customers about the situation of wood, but also on steel, transport, etc... We also guide our customers towards reverse and reuse solutions for their pallets.

How long do you think current market conditions will continue? Once the strong summer period in construction has passed, prices will stabilize. With this decent price level, investments in sawmills will be relaunched and capacities will increase all over the world and even if demand remains strong, we will achieve a certain equilibrium. One thing is for sure, we absolutely do not believe prices will fall back to 2020 levels!

Headquartered in Central New York, B&B Albany Pallet Company is located at the heart of the highest lumber cost region in the nation. Cant costs in the weekly publication Pallet Profile (published 6/4/2021) have reached 800/M in the Mid-Atlantic region. The intense demand in all areas of the wood packaging industry have led to never-before-seen prices. Labor shortages in the repair side of the market have pushed many recycled pallet customers to seek alternative solutions. Some pallet pools have put most of their customers into an allocation program, creating an incredible amount of strain on the new pallet manufacturers.

To help meet this demand for loyal customers, many new manufacturer pallet companies have branched out, looking for additional imported Canadian precut stock. This surge in demand for Canadian precut has created an auction-like atmosphere, changing what was once a cheap alternative to high-density North Eastern Hardwood into a premium commodity. All of this, in conjunction with the increased new home construction and home renovation projects, has put unprecedented demand on all wood species.

Loggers are faced with increased demand on hardwood and softwood and are struggling to keep up. Today, we are consistently turning away customers and pallet orders due to the lack of stable raw material supply. Our speculation is that we may see a return to normalcy in late Q4 but considering the supply chain bottlenecks occurring throughout the world, this may persist into mid-Q1 2022. This has been an unprecedented year, and no one knows what the future holds, but the market will need some time to adjust and hopefully soon after we will see some relief.

What are you are seeing during these extraordinary times? Did you ever see the movie “The Perfect Storm?” That is what we have. Lumber prices were/are astronomical if you can even get wood. Core prices are going through the roof. Equipment is 8 months to a year out. Nail prices are up. Fuel prices are up. At the same time the world is opening up for business. Demand for pallets is as high as it has ever been in the 15 years I have been in the business. You battle all of this and look at all the opportunity in front of you and you need to increase your workforce by 25% and can’t and another 10% of who you do have employed decided today they just weren’t feeling it. In years past I could contact some of my friends in the industry and really rely on some with more “experience” that myself. No one had a point of reference for this.

What is your business doing in response to the shortages? We had to circle the wagons on the recycled side and shorten our list down to the major and longstanding customers. If we are able to produce or broker any extra we contact some of those that we had to leave on the outside. As for our new pallets we are not taking on any new business unless it seems to be a better fit. We are pretty close on capacity to manufacture and if we don’t have some margin we would be in trouble. We are just trying to keep it simple.

What are you telling your customers? At first I would start out apologizing. After the 3rd customer told me that every one of his vendors was in the same boat and he was having to tell his customers the same thing, I stopped apologizing. The thing that bothers me the most is telling someone NO. We have worked for years to be able to say yes and in about 5 months’ time all I could say was NO. We made a conscious decision to shrink our customer pool and not play the bidding war. I believe we solidified ourselves with those customers. I hope when things ease up some we can get those on the outside back.

How long do you think current market conditions will continue? Wood is coming down some. Now with the all the brokers joining forces we have a new thing to worry about. Who really knows what that means for the recycled side of business. I value our relationships with them and we do rely on each other, but it makes us little guys nervous. The Fed has kicked the unemployment can on to September, so that is part of the equation. Now everyone gets a check for having children under 18 until 2022. So I’m hoping the new year will bring a new hope and not a new stimulus or unemployment plan.

In the past 15 months, our industry has been turned upside down. Between the lumber market, labor market, nails and freight, this has been an extremely challenging time for not only Ongweoweh, but for our customers as well. To navigate during these unprecedented times, we have used our nationwide scope to secure pallets from different regions, shipped further than ever, and relied on our expertise in packaging to provide alternative solutions to our customers. Our message has been clear: Situations like this are exactly what we are built for, and pallet supply is our number 1 priority.

Our customers are always asking, and rightfully so, “When is this going to end”. It’s hard to predict, and the outlook varies from region to region and producer to producer. We have heard that this will likely last into 2022, but that lumber may not be the longest lasting contributor to the volatility in pallet supply. More and more, producers are reporting that their top challenge is consistent, reliable labor. It is a daily struggle to find people to show up to work, and perform at the level our producers, and ultimately our customers all demand. One thing is for sure, pallet demand isn’t going to be slowing down anytime soon, and pallets are finally getting the long overdue attention that they deserve.

What are you are seeing during these extraordinary times? Despite the unprecedented rise in lumber costs we are seeing increased orders from our long term existing clients. We’re also seeing a new business inquiries in the form of new customers, brokers and other pallet companies requesting assistance. Although we’d love the opportunity to grow, we are limited in our ability to access new wood suppliers – specifically in the hardwood market. Our sawmill partners are limited by a variety of factors that include employee retention, log availability and/or shipping availability (i.e. truckers). All of these factors require us to be extremely creative when attempting to meet customer timelines.

What is your business doing in response to the shortages? Communication, communication, communication. Our Purchasing Manager works extremely hard with each wood supplier to ensure he understands when the next load is coming so that we confidently set expectations with our customers. He’s chasing down new leads for additional wood supply, however, that can be a trying experience as most hardwood suppliers are not able to take on new business. KDHT product seems readily available, however, our customers are hesitant to jump to that pricing tier.

Lately we’ve had to wear our sawmill hat more than we’d like. We have an ample supply of cants we keep on hand in ‘emergency’ situations.

Lately, we’ve been relying on this emergency stock to cut our own pallet stock to supplement the lack of supply. We can do this because we’re blessed with great, flexible, hardworking and committed employees. Finally, we’re also talking to other pallet manufacturers to share experiences – it’s therapeutic to know others are facing the same or similar challenges as we are.

What are you telling your customers? Fortunately, we have great relationships with our customers. We’ve always been forthright when it comes to pricing and delivery timeframes. Now more than ever, we have to educate our customers to help them understand what’s happening in the market. With improved transparency, our customers can make more informed decisions. The transparency benefits the customer in many ways. These discussions not only provide customers a window into our world, but it’s also an opportunity for them to provide us a window into their world. By sharing market intel, we learn more about each customer’s priorities which may lead to opportunities on how we can be a more efficient supplier for them (e.g. consolidation of pallet types, delivery timing, future state growth, etc.).

Finally, we all know that pricing impacts typically get passed down to the end consumer – our ability to arm our customer with information re: price allows them to better inform their respective customers.

How long do you think current market conditions will continue? As I write this, we are seeing a softening in the SPF market which is a start. There are so many variables to consider as the pandemic has shifted how and where people choose to live, consumer behaviors are different, there’s an aging and retiring workforce, a new administration in D.C. and we’re becoming more globally connected than before. We expect to see prices stabilize by year end, but I think we’ll continue to see multiple variables impacting the supply chain for an extended period. I suspect employee retention issues to be the most constant.

What are we seeing during these extraordinary times?

• Price increases on Nails and other raw materials along with almost no availability at any given time
• Rising Labor costs and lack of laborers in general
• Lack of Cores and Price increases on Cores
• Lumber Costs and Lumber availability

What is our business doing in response to the shortages?

• We continue to seek out other Mill Partners throughout the country to help serve our current and new customer portfolios.

What are we telling our customers?

• Hallwood is in continuous contact with our customer base and giving honest updates as it pertains to lumber markets, availability and timelines on possible relief
• Hallwood offer’s our customers the same industry newsletters and articles that we obtain each week and month to back up our feed back to them

How long do you think current market conditions will continue?

• We feel it could be late 2021 or maybe even into 2022

We are reaching out to our customer base to inform everyone about the unprecedented pallet shortage taking place throughout the country. Just in this year alone, new lumber pricing has increased by up to 400%. As a result, demand for recycled and combo pallets has increased to levels never seen before, causing shortages throughout the country.

We are receiving multiple requests for pallets from Southern California, as well as out of state, but have declined any new business and limited all sales to our current customer base only. Even with these measures we are behind on customer requests as the whole market is overstrained. We have done everything possible to hold our pallet prices with hopes that the market would improve, while availability continues to worse every week. We predict the current situation will continue through the end of the year.

Factors affecting current pallet shortages:

• Labor shortage in lumber and pallet industries
• Shortage of pallet cores
• Reduction of new pallet builds due to high lumber costs
• DIY projects increase during pandemic shutdown
• New build increases in the housing market
• Increased forest fires over the past two years
• Renewed lumber demand from overseas markets

The often-overlooked pallet is now a leading cause of supply chain disruption. No one predicted the tsunami of price increases that we are still experiencing. Booming demand, extreme raw material shortages, rising diesel prices, vanished labor, wet weather impacts, and sawmills/manufacturers reaching 100% capacity created the perfect storm. Sticker shock aside, many production planners are in a panic wondering why they don’t have pallets and why orders are being delayed. Many industrial lumber buyers are questioning how much they should pay over publication prices and how late the shipment will arrive.

Competition remains fierce throughout the pallet supply chain, and a record increase in demand and price has left everyone scrambling. My recommendation to pallet purchasers: lead time and safety stock are your best friends. You must be flexible, understanding, decisive and act quickly to secure production. To manufacturers: keep legacy accounts a priority and advise clients about all production delays. Communication, collaboration, and extended lead times are paramount to keep supply flowing. Relationships and respect are everything. Be fair, strategic, and relentless in the pursuit to maintain continuous supply throughout these unprecedented market conditions.

Signs of relief are on the horizon, but things in the pallet industry will get worse before they get better – including price increases. Looking ahead, the new normal for pallet prices could be much higher than the industry is accustomed to. My prediction is 90+ days to deplete peak lumber inventories, a plateau stretching 3-6 weeks in mid-late Q3 and then a gradual but steady decline in mid-late Q4. Companies will likely want to revert to favorable species/specs at lower prices once supply loosens. Keep your head on a swivel in this extremely volatile market and together we will thrive through the disruption.

As an equipment, parts and fastener supplier Viking is seeing long lead times and rising costs.

We are leveraging our long-term supplier relationships to ensure we have priority. In some areas we have renegotiated terms to ensure product is available. In some cases, we prefunded orders to get higher priority. We are ordering service and machine build parts earlier than normal to try and build inventory levels.

The closed Machine Sales pipeline is growing fast and we are asking customers to order early and expect longer lead times.

Specific to the Fastener line of business, obtaining shipping containers is challenging. We are telling our customers to order early.

I think the current market conditions will exist into 2022. That said, we are continuously working to assure we can meet our customer’s needs. Due to the complex nature of supply chain it is difficult to predict the end, what we can predict is that we will work hard managing our supply chain.

What are you are seeing during these extraordinary times? The combined impact of market shortages of used pallets, rental pallets, labor, and lumber has translated to unprecedented new business inquiries. While we maintain adequate supply to support existing customers, we are not taking on any new accounts at this time. We are beginning to hear examples of pallet companies putting customers on order allocation, or have run out of supply.

What is your business doing in response to the shortages? We are continuing to foster partnerships with our raw material suppliers and employees. Strong historical partnerships have allowed us to maintain uninterrupted supply and unaffected lead times for our customers.

What are you telling your customers? We are reassuring our customers that we have them covered. We are declining new opportunities to make sure we keep our historical accounts stocked up. While disappointed we couldn’t help more customers, we are offering invitations to keep us in mind when the market turns around. Once we can safely bring new customers on, we’ll work to confirm more supply for the next time we enter a lumber shortage cycle.

How long do you think current market conditions will continue? We expect overall demand to remain very strong for the next 12 months. Acute shortages should improve over the coming months. Labor, on the other hand, will be a challenge for the foreseeable future. Eliminating the extra Government Covid unemployment benefits will help, however the issue is complex.

Pallet manufacturing is hard work. As we continue to receive fewer applicants, we need to be creative in terms of shifting more of our product offering towards automation. We also need to continue to improve employee engagement and the overall work environment.

The market was not ready for this kind of situation. In June 2019, a 2x4x8 stud was costing half the price of a medium latté at Starbucks and last year 2/3. Was it fair? The present situation is not good, but we will probably not go back to low past prices.

We did a few things to help both the customers and the mills: do longer runs of one item to produce more volumes per day, think “outside the box” with large and small mills that produced dimensions adapted to the pallet specs instead of standard commodities. We have the privilege to have access to good steady volumes of precut material. We never take our customers or the mills for granted. We earn trust and nurture relationships one load at a time.

Regarding what we’re telling our customers: it is important to pay fast to be on the top of the list and be flexible on the products they can use. We have been informing our customers with newsletters, emails and conversation on the lumber situation. We have graphs and documentation to support the latest increases so they can justify their pallet prices.

Commodities are down -20% dragging down some of the SPF low grades with it. There could be more adjustments until construction grades firm up again. Hardwood, SPF low grades and SYP have not filled yet the pallet manufacturers yards. Cut stock is in high demand because of labor situation and commands a premium. The global manufacturing sector seems to have strong order files, so they will need more pallets, not less. Used pallets demand is stronger than supply, pushing recyclers to purchase cut stock. Unfortunately, we do not see major relief for a certain time. This is a tough situation for the pallet industry. We hope it will soon go back to something more acceptable.