July-August 2016

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24 PalletCentral • July-August 2016 here may be a love/hate relationship between the hardwood industry and wooden pallet and container manufacturers. Just as many pallet suppliers might feel underappreciated by their customers, hardwood pallet cant, lumber and cut- stock suppliers can feel undervalued by their customers. Emotion aside, there is a strong dependency on the wooden pallet and container industry by hardwood suppliers. The wooden pallet and container industry is, by far, the largest consumer of sawn U.S. hardwood production. The hardwood consumption chart shows usage by the pallet industry ranged from a low of 3.0 billion board feet (BBF) to a high of 3.685 BBF in the 2008 to 2016 period. During the U.S. recession, the pallet industry accounted for over 46% of all hardwood lumber consumed by U.S. major markets. Prior to the recession, the wooden packaging industry comprised less than 40% of the total. It is headed in that direction, post-recession. Still, the importance of this one industry to the hardwood supply stream cannot be overstated. So, how is the love/hate relationship now? The wooden pallet and container industry is competing against a barrage of composites or man-made products. Some are equal in durability to hardwood pallets and containers, and some are less expensive. For wooden pallet manufacturers, keeping raw material costs down is imperative to holding onto market share. A few years ago, when hardwood cant and pallet lumber supplies were tight and prices began to rise, manufacturers sought out alternative raw materials. Softwoods were both available and less expensive, therefore, a logical choice to supplement hardwood shortfalls. These are reasons why hardwood suppliers, as a whole, did not experience the same rate of demand growth as pallet sales grew. The improving, albeit slowly, U.S. economy boosted shipments of durable goods five consecutive years heading into 2016. Annualized data through March 2016 are not a good representation of economic trends for the year. The numbers are down from 2015, yet are the third highest in history. Where is the U.S. economy headed? I am not an economist, but there is enough information and history to provide some insight into where the economy stands and the direction it is heading. One of the obvious indicators is GDP. The U.S. growth rate has been far from stellar. Most economists expected real GDP to be higher by now. For a few short years, petroleum production in the U.S. was a major contributor to the nation's overall economic growth. Of course, that has since faltered due to global supply glut and low prices. In fact, the U.S. economy is heavily influenced by global circumstances, and most economies throughout the world have not Hardwood Suppliers and the Wooden Pallet Industry By Hardwood Market Report MARKETS T

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