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Pallet Market Update – Spring 2021

Pallet Market Update – Spring 2021

MARKET TRENDS

UK or Baltic pallet timber remains the first choice for the pallet and packaging industry. In recent market updates, we have written of continued pressure on both timber price and availability. At present, we see no relief in this area, and we expect this to continue into the second half of 2021.

Globally, high levels of construction activity in China and, in particular, housebuilding in the US continues to drive huge volumes of imported timber out of Europe. Typically, the US would satisfy this demand domestically or via neighbouring Canada. A combination of extreme weather events and Covid-related production and transportation difficulties has forced them to fulfil this demand elsewhere. Sawmills in Central Europe and Scandinavia have therefore stepped forward to meet this demand, attracted by record-breaking price levels and variable economic recovery and subsequent demand from their domestic markets due to what has been an erratic climb out of Covid lockdown.

The UK pallet industry is not immune to these external factors’ direct impact, which combines with specific circumstances within our domestic market. Log supply has been constrained due to problems issuing felling licences in Ireland, resulting in log stock being diverted from the West of Scotland and restricting availability in UK mills. Adjacent industry sectors also impact us. We continue to see the markets for fencing and DIY products continuing to compete for timber which will likely increase further as the weather improves and domestic consumers continue to invest in their properties in lieu of their ability to travel and holiday.

Similarly, the UK housebuilding sector remains particularly buoyant. Together these factors mean we are seeing the price of pallets and packaging to end-users increasing and a severe shortage of reconditioned pallets caused by a national reduction in the pool of second-hand pallets. This is due to exceptionally high demand from e-commerce during lockdown measures coupled with reduced returns from businesses – predominantly those in the retail sector – whose outlets are closed.

There is no doubt the sector dynamics are the most difficult we have seen for many years, with price points reaching record highs. This situation is further compounded by commodity increases in steel for nails and increased international shipping costs. The breadth of Scott Group’s supply chain and our successful partnerships with the largest mills in both the UK and Baltics have enabled us to maintain service continuity for our customers. That said, we respectfully ask all customers to engage with their account manager to ensure we have the best available forecast information to allow for effective planning to safeguard business continuity in these challenging times.

European, monthly and quarterly timber price movements are well documented in several respected, independent indices, including the FEFPEB Pallet Timber Price Index covering UK, Germany, Netherlands, Italy and Sweden, the German HPE, French CEEB and UK Afry indices.

All are available online or from your account manager, who will gladly talk through any concerns you may have.

BREXIT – ISPM15 UPDATE

Clarification has been sought from the UK Government following recent statements that have been made and then published in the public domain. Most recently, the statement issued by Rt Hon Michael Gove, the Chancellor of the Duchy of Lancaster.

Read the statement here.

In particular, where the following statement is made – “From March 2022, checks at Border Control Posts will take place on live animals and low risk plants and plant products.”

Unsurprisingly, this has led to some WPM using businesses questioning the requirement for wooden packaging to be ISPM15 compliant since 1st January 2021.

UK Government through DEFRA has now issued the following clarification: 

Since 1st January 2021, all wood packaging material (WPM) moving between Great Britain and the EU and from Great Britain to Northern Ireland, has needed to be treated and appropriately marked in compliance with international standards (ISPM15). Defra can confirm that this remains the case: all WPM moving between Great Britain and the EU, and from Great Britain to Northern Ireland, must be treated and marked in compliance with ISPM15. This is in line with international requirements for trade and is in place to protect both the EU and UK from potential harmful plant pests and diseases. 

SCOTT PALLETS INCREASES ISPM15 CAPACITY – A RECOVERY FIRST

The pallet recovery service has been accredited with the exemption to use heat treated timbers supplied from our registered ISPM15 compliant sawmills for repairs to the ISPM15 pallets they recover. This will ensure a quicker turnaround time in returning these pallets to our customers so that they can be reused.

Due to Brexit, many pallet users have had to start using or increasing their ISPM15 compliant pallets. Indeed, several companies have already changed to 100% ISPM15 pallets, even though many are not intended for transit through Europe. Primarily, this is due to lack of space for segregation, fear of the wrong pallets being used to ship their products globally and as a result of the UK leaving the EU, this now includes goods being imported into the EU and the consequential issues of load rejection.

As a result, we see an increase in the number of ISPM15 compliant pallets being recovered for reuse to ensure they aren’t recycled (e.g. chipped for animal bedding, manufacture of chipboard or for energy via biomass) before reaching their predicted end of lifecycle.

Cathy Morio, Senior Sales Manager – Recovery, said: “This is fantastic news for our pallet recovery customers, and we are already receiving their positive feedback. Not only does this exemption help us to reduce costs for customers, but it speeds up the process of returning certified repaired pallets back to customers for reuse.”

The approved Forestry Commission auditor stated: “The pallet recovery site at Burton is really impressive. The environmental benefits of the work being done here are extraordinary and should be highlighted as an example of what can be achieved by reusing wooden pallets.”

This exemption, the accreditation of Scott Pallets’ Bathgate site, the first in the UK to carry out repairs to EPAL licenced Euro pallets using pre-heat-treated components, and the major investment in new kilns planned for this year underlines why Scott Pallets is the first choice, national supplier for ISPM15 compliant wooden packaging.

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