There’s no doubt that Brexit continues to be the dominant factor in the pallet sector.
Whether it’s TIMCON’s work or trading trends, the UK’s departure from the EU has shaped business since Theresa May set the first Brexit deadline of March 29, 2019, and, like industries around the country, the pallet sector is poised for the current deadline of January 31.
TIMCON has worked closely with Defra and the Forestry Commission to address how the UK will meet the requirement for ISPM15 heat-treated pallets. Once the UK leaves the EU, with or without a deal, it will lose its exemption on the phytosanitary standard, which requires all wood packaging material entering the EU from non-member states to be heat-treated.
TIMCON president John Dye said the organisation had not shied away from Brexit planning and Michael Gove, when he was environment secretary, held up its pragmatic approach as an example to other industries.
The EU has also been impressed with the industry’s working relationship with plant health officials and Defra, he added.
“It’s a real compliment to the whole industry,” said Mr Dye. “We haven’t hidden from the fact that there were problems and we haven’t been confrontational. We’ve worked to come up with solutions. As a result, we’re in a much better place, although I wouldn’t be complacent that there will be no problems.”
The pallet pools have been increasing their ISPM15 stocks and TIMCON was hopeful that the UK would not lose its exemption immediately.
One of the biggest challenges has been in assessing whether the UK has sufficient ISPM15 kiln capacity. Mr Dye said that once the UK is over the initial hurdle of the new ISPM15 demand, the chances are that existing capacity will be sufficient.
“Manufacturers have looked at the way we’re operating and it’s fair to say none of us were running flat out on heat treatment. If we were to start using our kilns and chambers 24/7 that would almost double capacity in the UK,” he said.
TIMCON is also working with its European counterpart, FEFPEB, and the pallet pools; and the Welsh government’s wood kiln investment scheme will provide grants for companies to invest in heat treatment. “There have been a lot of positive developments,” said Mr Dye.
The on-again-off-again Brexit deadlines have continued to affect the market as all sorts of businesses have been stockpiling goods and therefore keeping pallets out of circulation.
“It’s put pressure on the supply of second-hand pallets because there are a lot of goods sitting on pallets in warehouses. Also, purchasers of pallets are finding it difficult to forecast because of the uncertainty,” one pallet manufacturer told TTJ.
Once Brexit does happen and all these goods start to move, there is a fear that pallet demand will plummet.
“We think the market, particularly for new pallets, will be quieter because the uncertainty of Brexit will be removed, one way or another. There’s a lot of stock sitting on pallets that’s going to come off so the pallet pools won’t need as many pallets,” a sawmiller said.
Pallet manufacturers are also facing competition for pallet logs. As UK sawmills have reduced production of construction grade timber, the volume of chips available for the biomass sector and panel mills has fallen and these sectors have turned to the small roundwood market for raw material, a sawmiller said. And, he added, the biomass industry usually offers a higher price.
Longer-term, however, the picture remains positive as pallets will always be needed to carry goods around the world.
“The pallet industry is very resilient; it’s had many challenges over the years but it is still here and still changing,” said a manufacturer
