Continued economic gloom is casting a shadow over the pallet sector. While there was a slight dash around Christmas and a slightly stronger showing in food and beverage, business remains flat and competitive.
"Customers are pushing for cheaper prices, and the trend towards repair and reducing costs is as strong as ever," one source said. However, he warned continued slimming down of the specification was reaching the limits. "It is a safety-critical product so people still looking to save on the spec will have to be very careful."
One said competition was very keen. "Fifty non-standard pallets here, 100 there; it’s supply and demand. The market is awash with pallet wood."
Another source said: "Even seasonally adjusted, demand is very weak. Timber is readily available for many specifications and prices are steady because sawmills have timber to shift."
While a few years ago home-grown timber accounted for 30% of pallets, with currency differentials that is now up to 80%. Some Baltic timber is creeping back into the market and there is talk of Chilean imports, but lead times in the current climate generally rule against forward buying abroad, a source said.
"Home-grown mills have so much stock on the ground and they can deliver the next day. So why wait four to six weeks for delivery, or months from South America?"
Concern remains, however, about the possible expansion of the ISPM 15 phytosanitary regulation to include pallet movements within the EU rather than just movements into the EU or out of Portugal. The measure could add 15% to the cost of a pallet but there is no sign of an early decision.
"They’re looking at it from a scientific and hygiene point of view, but there is a practicality to this. It will almost certainly mean kiln-dried timber and that will need a lot of investment and capacity in the processing, and that takes time," a source said.
