Letter from Founder and President, Jimmy Wilson
May 20, 2019
You may have heard that lumber prices are down nationally. So why are wooden pallet prices staying level or going up when the hardwood market is depressed? Here’s the rest of the story.
Like so many things, there’s not one simple answer. There are a multitude of factors making the price of low-grade lumber used to make pallets and other wood packaging products remain stable or cost more in today’s market.
Hardwood lumber used to build pallets is the low-grade part of the log, typically the center portion. Most pallets built by Bay Wood Products are created from softwood pine.
Since at least mid-2018, pine (softwood) and red oak (hardwood) markets have been depressed. The high grade continues to stay depressed because the demand from its biggest consumer, China, has decreased as the foreign nation experiences a housing crisis and downturn in the economy.
In the U.S., extreme weather conditions in the past 12 months – from severe flooding to winter storms – impacts the availability of logs. Fewer logs can be harvested and delivered to sawmills in a timely manner. The average time for high-grade lumber to go from mill to market is about 90 days which includes sawing, pre-drying, drying and dressing. Mills often slow down production when hardwood supplies are low.
And when the mills are running at capacity, they rely on producing and selling high-grade hardwoods for the bulk of their business. They don’t come to work to make low-grade lumber. However, when the high-grade products are created, the low-grade wood is a byproduct. So, when the supply of logs is low and the market for high-grade is depressed, the result is that much less high-grade and low-grade are created because they come from the same logs.
Additionally, recent technological advances in equipment used by southern pine lumber mills reduces the amount of low-grade material being produced, adding to the supply pressure that supports the higher cost of material for pallets and industrial uses.
When that happens, many industries that would typically use low-grade hardwoods, including railroads, oil fields and pipeline construction, will choose to pay more for the same product. Instead of paying more for low-grade hardwoods, most pallet manufacturers turn to pine, increasing demand for the low-grade southern yellow pine – which makes up the largest part of wooden pallets and other packaging materials made by Bay Wood Products. The increased demand, as you can imagine, can make prices remain steady and even rise.
The good news is that Bay Wood is positioned to keep a steady supply of southern yellow pine moving from area mills to our manufacturing plant. It’s our priority to ensure our customers get the pallets and packaging they need -- exactly when they need it -- at the lowest price possible.
It remains our pleasure to serve you, our valued customer.
Founder & President