Wooden Pallet Prices to Decline in Europe in 2023

The price of wooden pallets in Europe is expected to decrease in the first half of 2023 due to a slowdown in the economy and increased supply from alternate regions like LATAM and South East Asia. Timber is the major raw material for wooden pallets and any fluctuations in the timber market directly impact the prices and supply of wooden pallets. In 2021 and the first half of 2022, the price of timber skyrocketed, causing an increase in the price of new and recycled pallets.

The cost structure of wooden pallets is 60-65% raw material cost, which includes lumber, nails, and splinters, followed by 8-10% repair and maintenance cost, 13-15% fixed cost, and 12-14% labor/miscellaneous expenses. The industry margin is in the range of 20-25%.

The cost of timber increased throughout Europe in the first half of 2022 due to reduced sawn timber production and inflation. The UK saw a 10% increase in raw material cost compared to the previous quarter, while other regions of Europe had a 6-8% increase. The reduced sawn timber production was due to inflation and higher interest rates. The raw material cost is expected to decline in 2023 due to the economic slowdown and increased supply from LATAM and South East Asia.

Other factors that have a high impact on wooden pallet pricing include energy and logistics costs. The prices of electricity are expected to increase throughout Europe in the coming months due to the uncertain energy situation in the region. Power generation is still cost effective despite the decline in electricity prices -- thanks to the fall in short-term gas prices due to warm weather and full storage tanks. Coal has been the least expensive fuel, with countries such as Germany and the United Kingdom extending the life of thermal plants to ensure winter energy supply.

The pallet timber prices increased in the first and second quarter of 2022 due to the Russo-Ukrainian war but decreased in the third quarter due to the weak demand in construction industries. The prices are expected to remain high in the coming months but are not expected to reach pre-pandemic levels for at least 4-5 months. The demand from other industries, like construction, is expected to decrease and remain low for 1-2 months. The decreased demand for wooden pallets and increased usage of recycled pallets and plastic pallets have led to the prices of new pallets rising from €7 to €20 (average in Europe as of February 2022).

In the first half of 2023, the wooden pallet prices are expected to decrease due to the fall in timber prices and the weakened demand for new pallets. The increased supply of timber from alternate countries and the economy slowdown will decrease the timber prices, leading to a decline in the price of wooden pallets.

The prices of wooden pallets (euro/pallet) in different grades are listed in the table below:

Source: Holz Price Index, FEFPEB, globalwood.org, ceebois

Pallets Dimensions: 1200mm X 800mm (EPAL Pallet)

The EUR/EPAL-pallet is 1,200 mm × 800 mm × 144 mm (47.2 in × 31.5 in × 5.7 in); it is a four-way pallet made of wood that is nailed with 78 special nails in a prescribed pattern. The weight of a EUR/EPAL-pallet (EPAL 1) is approx. 25 kg

Base material is mostly Pine (Pinus sylvestris)

Prices listed above are for contract prices with 400 pallets or above purchasing (excluding retail prices). For orders >700 pallets, which is full truck load, additional 10% discount can be applied to the prices above)

In conclusion, the fluctuation in the timber market has a direct impact on the prices and supply of wooden pallets. The increasing prices of timber have affected not only new pallets but also recycled pallets in Europe. The cost structure of wooden pallets, including the raw material cost, which constitutes 60-65% of the total cost, has a significant impact on the price of wooden pallets. The prices of wooden pallets are expected to decrease in Europe in 2023 due to the economy slowdown, increased supply from alternate regions like LATAM and South East Asia, and weakened demand for wood products. The prices of wooden pallets are expected to decline from €22.85 for Grade A new pallets in December 2022 to €20.30 for the same grade in May 2023. The decrease in timber prices will ultimately result in a decline in the price of wooden pallets in Europe.