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Pallet C e nt ral • Ma rch -Ap r il 2 0 24 45 More than half of the responses are lacking confidence about the next six months. "The economy and the interest rates are the biggest concerns. It seems when interest rates go up, sales go down. People don't spend money, so the need for pallets goes down." Over half of respondents are projecting inventory levels to remain the same for the next six months, with an additional 29% projecting levels to decrease by 10% or more. Many members reiterated the election, interest rates, and the world economy as key drivers in the stability or instability of inventory levels in the coming months. However, many of those responding to higher inventory levels said there is an "over-supply of recycled pallets on the market, and where inventory is piling up, prices plummet." Sales Volumes Expecta ons e consensus surrounding sales volume levels in the industry is notably pessimistic. A considerable number of respondents (78%) foresee sales volumes as the same or going downward for the next six months. Members are "not projecting increased volumes from current customers until the 3rd or 4th quarter." ere were several comments about customer loyalty, causing a stir. "Price. Price. Price. It's no longer a pallet manufacturer's market, and clients are shopping. Every business is looking at prices. ere is less concern for quality, service, and reliability." What Members And Customers Are Saying A few of the top concerns from members are not surprising: overall economy, elections, and margins. "We don't see an increase in house construction. Mills are already cutting back on production due to demand and trying to stem timber price pressure. Lumber prices are rising; supply is tightening." ere is also "too much KD SYP lumber on the market, and more coming, driving pallet prices through the floor." Others are seeing "tightening margins with new competition pressuring price." Concerns about the upcoming presidential election have added an element of uncertainty surrounding regulatory shifts and economic policies, leading some members to approach the future with caution. Others are watching costs and investments and are ready to pivot quickly towards increased volumes in the next six months. Prepara ons For The Next Six Months NWPCA members are always forward- thinking and were quick to comment on steps they are taking now to prepare for market swings that may occur in the next six months. ese include a heavy focus on operational efficiencies, costs, and tighter inventory control (i.e., getting as lean as possible). Taking care of employees and customers are also important. As one member said, "Staying in front of our customers to keep them informed, shortening contract lengths, adding safety thresholds on pricing to protect us and our customers in the event of significant swings in one direction." Several comments relayed were about "strategic longer term lumber supply arrangements" and plans to use the slowdown to work more closely with all their suppliers (insurance, nails, saw blades, propane) on cost-saving opportunities, while many are increasing marketing efforts, Anne e Ferri is NWPCA's vice president of communica ons. She plays a senior role in leading the organiza on's communica ons with the members of NWPCA and the industry. She may be reached at 703.519.6104 or aferri@palletcentral.com. making more phone calls, updating their websites, and pushing employee training. In an industry where automation is prevalent, many members have similar thoughts. "We are constantly looking and investing in automation, equipment upgrades, and diversification of product offerings to streamline operations, enhance efficiency, and stay competitive." However, being conservative, some are waiting to see how the first quarter of 2024 pans out. While 2024 can be more difficult to predict given the presidential election, interest rates, and other issues noted above, members are analyzing margins weekly. Just how long will the slowdown last? ere was some optimism from the 23% of respondents who were grateful to see recent upticks in sales volume and inventory levels. NWPCA wishes to thank everyone who participated in this "Economic Pulse of NWPCA Member" survey. Member respondents have access to the full results and commentary (all anonymous). Did we get it right? Drop a note to aferri@palletcentral.com with any feedback and comments.

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