July-August 2018

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26 PalletCentral • July-August 2018 he U.S. wooden pallet and container industry is far and away the largest domestic or international market for U.S. hardwoods by volume. However, hardwood consumption by the industry steadily contracted from 2014 through 2017, falling a total of 17%. Projections on pallet markets suggest total industry consumption of wood raw materials increased in those years. However, elevated prices and persistent shortages of hardwoods fueled substitution with lower-cost, readily available softwood raw materials. Many industry observers believe softwood surpassed hardwood as the leading material in pallet construction during that period. As softwood use became more prevalent, supplies of hardwood cants ballooned, and prices – averaged across all eastern hardwood producing regions – slid a total of 16% from the end of 2014 through the first two months of 2017. The Turning Point While overall pallet industry consumption of hardwoods declined in 2017, the middle months of the year marked a turning point, during which demand and prices stopped falling, leveled off, and began to climb. This turnaround resulted from several factors. First, softwood supplies tightened, and prices escalated. The change was due, in part, to the U.S. Department of Commerce's April 2017 implementation of countervailing (CV) and anti-dumping (AD) duties on Canadian softwood lumber imported to the U.S. The combined CV/AD rate for most Canadian companies is 20.23% and remains in effect at the time of this writing. Second, hardwood pallet lumber and cant prices were at the lowest levels in several years. Third, U.S. GDP growth accelerated from Q2 2017 onward and finished 2017 at 2.3% compared to 1.5% in 2016. This point is quite important, as growth in the general economy is vital to pallet sector growth because products of all kinds are shipped on pallets. Finally, surging residential construction elevated demand for softwoods and, in general, By Hardwood Market Report The Hardwood Supply Strain T

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