A whole host of issues, including natural disasters, the Covid pandemic and the conflict in Ukraine, have combined into a “perfect storm” that has created a shortage of shipping pallets, both nationally and worldwide. Recently we have been reporting on the various obstacles facing the global supply chain such as the Covid lockdowns in China and the ongoing war – now we must add the shortage of wooden pallets – crucial in the packaging, handling and storage of goods.
According to the European Pallet Association (EPAL), more than 600 million of its pallets and 20 million of its box pallets should be in circulation. A large portion of another 300 million CHEP owned pallets used in global deliveries are said to be held by manufacturers and retailers to safeguard their operations. Businesses holding on to their pallet stocks mean they are not being returned to the supplier pool and cannot be recirculated into the supply chain, leading to more demand than supply.
The prices of timber have risen by up to 40% nationally and up to 90% for international timber since the start of the Covid pandemic. This significantly impacts makers of pallets when needing to build new equipment due to the lack of dehired pallets back into the pool. Russia’s invasion of Ukraine at the end of February has exacerbated the inflationary pressure on the costs of manufacturing re-usable pallets.
Ukraine is a major producer and, before the war, was exporting close to 15 million pallets a year to Europe. However, its workshops are now idle, resulting in a shortage of new products. In addition, a number of countries in western Europe would, in normal times, source up to 25% of their pallet and packaging wood from Ukraine, Russia and Belarus, but conflict and sanctions have brought these supplies to a halt.
Australian timber is in high demand, not only nationally but globally, but there is simply not enough to go around. With a wooden pallet’s life span averaging 7 years with repairs every 20 or 30 trips, the availability of timber for repairs and replacements is vital to ensuring our pooled pallet system can continue working effectively.
In a statement to ABC News, a spokeswoman for the Victorian Government said the worldwide shortage of pallets and other timber products was due to a number of factors including trade issues, bushfires and the coronavirus pandemic.
The country’s largest timber pallet manufacturer, Dormit, owned by Pentarch in Melbourne produces 70,000 pallets each month, which are used to move stock for the major supermarkets. But the Construction Forestry Mining and Energy Union said the mill was running out of logs and was winding down production.
In an article by the Financial Review, transport and logistics group Brambles warned that the global pallets shortage will probably drag on for another year, after it raised prices by 8% in the December half to help claw back $377 million in soaring timber costs.
The company has been battling to secure enough timber pallets because the pandemic has led retailers to lift stock levels in warehouses, to ward off product shortages and stockpile empty pallets as a safeguard as supply chains buckle.
Brambles – which operates a pool of 345 million pallets, crates and containers across 60 countries – said on Friday that timber prices had reached record levels in Europe and Latin America. They also said the fallout from the Russian invasion of Ukraine and the upward pressure on fuel prices globally would be closely monitored. Brambles does not have any operations in the Ukraine, but has a small one in Russia.
The ongoing extreme demand is unpredictable and doesn’t enable many companies the ability to forward plan with confidence but still, it pays to plan ahead. Be innovate and adapt. Exchanging pallets can be a viable option for many deliveries, ensuring you always have pallets on hand. Suppliers offer a multitude of equipment types and there may be another readily available option for you to leverage. We recommend that you work with your suppliers and clients and ensure what you require is communicated as soon as possible so you have every chance of receiving your orders as needed.
For more information about all matters concerning international shipping and trade, contact us here at Colless Young. As licensed Customs Brokers and International Freight Forwarders we offer correct, professional advice on all your import and export trade transactions. We are based in Brisbane and provide a complete range of logistics services, for both airfreight and sea cargo through all Australian ports and airports.
