palletcentral

22 Pallet C e nt ral • Janu a r y -Fe b r u a r y 2 0 24 O verall, there appears to be a flat pallet market for the 2024 year. With uncertain economic clarity and slowing consumer consumption, I envision flat to declining sales for both pallets and pallet equipment. Many in the industry made good margins in recent years that were reinvested in the industry. Unfortunately, margins are reverting back to the mean, which is too low and not good. Many pallet company acquisitions were made when margins were at their highest. Now that margins are declining, the returns on these investments are headed south. It will be interesting to see how long these equity company purchases hold together or end up getting fragmented back out to smaller regional and independent owners. I'm not sure in the long run that the pallet industry produces the ROI that equity firms need—this is yet to be decided. One of the growing factors that will negatively affect the industry is the growing problem of getting rid of sawmill residuals—dust, chips, bark, recycled pallet components, and pulpwood for loggers. e continued closing of papermills, if not offset by a greater demand and more geographical locations of pellet mills, will be detrimental. Without a viable pulpwood market, loggers will continue to struggle to stay in business. Without loggers, we will all feel the pain. Being that pine has taken over for hardwood in the pallet industry, the sustainability trends look to be in good shape. e challenges for the 2024 year will be to make it through and live to fight another year. One thing for sure in the pallet industry, things are always changing and yet the wooden pallet is here to stay. W e at Sabra International have been supplying cut stock (mainly plantation pine and eucalyptus) to the pallet industry worldwide for close to 30 years, so we have seen many ups and downs. I believe that in 2024, like 2023, we'll still be nursing our post- pandemic "hangover." Consumers seem to be spending more on services than goods, though recent data on retail sales have been quite strong. Some international markets (Mexico, for example) are importing more pallet wood than the USA, and I believe this is a function of low prices for domestic wood. As domestic producers lower output in response to weak demand for higher grades, lower grade prices will tend to rise. is should allow for imported wood to be more competitive. Ocean freight rates are trending downward in 2024, after rising in 2023, which should also make imports more attractive. Bolstered by high interest rates, the US dollar is up against most currencies (though not against the currency of Brazil, a major supplier of imported pallet wood), which also makes imports less expensive. Given 2024 is an election year, I do not think the powers that be will want to do anything too drastic or controversial. If anything, they will err on the side of trying to overstimulate the economy. With inflation and gas prices down, and the labor market softening, there may be temptation for this approach. International crises will continue to draw a lot of attention, and if the two major wars (Ukraine and Israel) end, there could be an increase in demand for wood products for reconstruction. Brad Tuminello, Owner, Southern Packaging Brett Ellis, President, Sabra International "Bolstered by high interest rates, the US dollar is up against most currencies (though not against the currency of Brazil, a major supplier of imported pallet wood), which also makes imports less expensive."

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