Analysis of Pallet Demand in Germany
14 Nov 2016
Olaf Oczkos, the managing director of Paletten Report, a monthly market report sent to subscribers in Germany, observed recently that the prices for wooden pallets in Germany have been slowly decreasing during the last year. The Paletten Report compiles a price index of pallets and also provides quotations on current pricing for EPL pallets in various conditions (broken, used or new) in two German regions. So they are in a good position to review price trends in the market.
Price Declines for Pallets in Germany
There appear to be several reasons for the price declines. Some of the raw materials and input costs have fallen, including those for timber and fuel. Yet demand has remained reasonably strong. One of the reasons for this apparent contradiction may be that a large manufacturer of pallets recently closed a plant, making more raw material available for pallet manufacture. And of course, there is an abundance of timber in both Austria and Germany.
The profit margin on Euro pallets is very low, and plants manufacturing only Euro pallets would probably have gone out of business some time ago. Other types of pallets are profitable, but plastic pallets make up a very small percentage of the total market, although their market share is increasing faster than that of wood pallets. On the other hand, much of the food industry favours using new pallets rather than second-hand ones, so new pallets are continually needed.
UK Market Recovering – Home-Grown Production Up
Things have not been quite so easy for the pallet industry in the United Kingdom. The worldwide downturn has affected many industrial and commercial sectors. This has not been helped by a phase of volatile timber prices and falling demand for brand new pallets.
Recent trading appears to indicate a recovery, although volumes are not as high as they could be. The trend for environmentally friendly business processes has led to an increase in the recovery, recycling and reuse of pallets, which is in itself a welcome development. This is part of the “circular economy” being encouraged by the government.
Another encouraging trend has been the increase in the use of UK-grown timber. Sawmills in the UK have made substantial investments in upgraded facilities and in the use of top-grade timber. There has also been more emphasis on service. Over 90% of the UK pallet market consists of wooden pallets.
However, one of the industry’s long-term concerns is that forests should be adequately replenished to safeguard the supply of home-grown timber. The Timber Packaging and Pallet Confederation (TIMCON) has been lobbying the government on the industry’s behalf over this issue.
The pallet industry in the UK has shown itself to be versatile and resilient. What effect the Brexit vote will have on the industry is currently unclear, although home-grown timber may become more cost-effective than wood bought from abroad because of the fall in the value of the pound. This itself may reshape the industry in the years ahead.