Why the Price of Wooden Shipping Pallets Has Soared

Tracy Alloway (0:11)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:16)

And I'm Joe Weisenthal.

Tracy Alloway (0:18)

Joe, I am really excited about this episode.

Joe Weisenthal (0:22)

Are you always excited about episodes? Aren't we both always really excited about episodes?

Tracy Alloway (0:29)

Yes, they are like my children, and I love them all.

But I have to say, this one, we've been trying to set up for a while, and it fits very squarely into... I made a pun. If it's very squarely into our supply chain and logistics episodes from this year, we are going to be talking about pallets. So those wooden crate-like things that you use to actually move goods around the world.

Joe Weisenthal (1:01)

I'm very excited about this one. As you said, we've been talking so much about logistics and supply chains. Obviously everybody knows that.

But one of the things that sort of makes the story fun or interesting is there is an infinite amount of depth. And so, you know, it's like, okay, you talk about ships, and then you talk about containers, and then you talk about warehouses, and then you think of like in warehouses, there's forklift operators and forklifts, lift up things that are on wooden pallets, and the supply chain for wooden pallets themselves, as we know, has been stressed. There's been a huge surge in the price of wooden pallets. Availability is an issue. And as we know, for many of our episodes, all it takes is one little thing to go missing, and you can't sell it. It's like, you know, you're like, think about a house. If you don't have faucets, you can't sell a house.

You know, if you have a shortage of wooden pallets, that disrupts everything, and that's sort of one of the lessons from 2022 One thing that you hardly ever think about, if there's an issue, it creates problems.

Tracy Alloway (2:00)

Totally. And I don't know about you, but one of the great things of doing these episodes is you always sort of learn new things, and one thing I learned in doing the prep for this episode is that there is a subcomponent of the producer price index for wooden pallets. And as you might imagine, given all the anecdotes about shortages and what we saw in the price of lumber earlier this year, it's been shooting up. And I think our trade correspondent over at Bloomberg, Brendan Murray, he actually reported that, depending on where you are in the world, the usual price tag of a wooden pallet is something like nine or $12.

And now it's getting up to $15 or more. So clearly some interesting pricing dynamics going on there. And I am very, very pleased to say, we really do have the perfect person to discuss this. He has been described as the elder statesman of the pallet world.

We're going to be speaking with Marshall White. He's a Professor Emeritus at the Department of Sustainable Biomaterials at Virginia Tech, which I just learned also has a giant statue honoring the pallet industry. So, you know, learning tons of new things already. Marshall, thank you so much for coming on.

So I'm thinking of a way to phrase this, but you know, I think a lot of people wouldn't necessarily assume there to be a specialized pallet professor at a university dedicated to technology. So why is that? Why are you there? What do pallets have to do with tech?

Marshall White (3:45)

We have an industry and university cooperative that back in 1976 led to the establishment of the Pallet and Container Research Laboratory at Virginia Tech.

And basically, the justification when people come by this facility and kind of comment, you mean there is a laboratory dedicated to pallets, is that the statue indicates, the statue you reference indicates pallets move the world. It's the largest consumer of wood, and so it has an impact on natural resource and natural resource availability. It has a direct impact on the cost of consumer goods. It is, if you will, the critical component in the unit load portion of supply chains for product moving around the world. It's the interface between all of the handling and shipping equipment and the packaged product. So its performance is critical to the success of supply chain.

Joe Weisenthal (4:42)

So, God, can we go three hours? I already have like a billion questions about... No, maybe we won't go that long, but I already have tons of questions just literally based on that first answer. Did you say it's the largest consumer of wood?

Marshall White (4:56)

Yes, when you look at the total volume of wood, basically the combination of corrugated packaging and the wood pallet itself really becomes the largest use of wood fiber. Good news is most of it's recycled fiber, but it is a huge use.