Buying & selling
The pallet shortage that wasn't
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The phrase “pallet shortage” has appeared in trade press in some form almost every year since 2020. Most of those years, there was no shortage of pallets.
There is a real thing that happens, and it is worth being precise about what it is, because the wrong response to it is expensive and quite common.
What a real shortage would look like
A genuine pallet shortage means fewer pallets exist than the economy needs to move goods. That has happened once in recent memory — in 2021, when new-pallet production was constrained by lumber supply and demand was simultaneously surging. Lead times went to eleven weeks and prices doubled. That was real.
What usually happens instead
- A regional core imbalance. Pallets accumulate where goods are received and are needed where goods are shipped. In a region with net inbound freight, cores pile up; in a net outbound region, they run short. This is geography, not scarcity.
- A grade imbalance. Plenty of pallets, not enough of the grade being asked for. Our Grade A demand has been rising for five years while intake mix has not changed.
- A footprint imbalance. Colorado's 36" keg squares in May. There is no shortage of pallets; there is a shortage of that pallet, in that month, in that region.
- A seasonal lag. Core supply reflects goods movement roughly six to twelve weeks earlier. A busy shipping season produces a core surplus two months later, not immediately.
| Symptom | Likely cause | Right response |
|---|---|---|
| One grade unavailable, others fine | Grade imbalance | Re-check whether you need that grade |
| One footprint unavailable | Footprint imbalance | Forecast it next season |
| Everything tight regionally, fine elsewhere | Core geography | Widen the sourcing radius |
| Lead times rising across new and recycled | Genuine supply constraint | Secure forward volume |
| Your supplier only is short | Your supplier | Ask what happened |
The expensive wrong response
Stockpiling. In late 2021 several of our customers built six months of pallet inventory. Through 2022 they discovered what pallets stored outdoors do over a winter, what yard space costs, and what tying up cash in a depreciating wooden asset feels like. Two sold the surplus back to us at a loss.
A wooden pallet is a poor thing to hold inventory in. It weathers, it moulds, it takes up a footprint disproportionate to its value, and it does not appreciate. The correct hedge against pallet supply risk is a forecast and a relationship, not a stack.
What actually protects you
- A forecast, even a rough one. It is the single most effective thing and it is free.
- Grade flexibility. An operation that can take Grade B for some destinations has twice as much of the market available to it.
- A second supplier for the footprint you cannot do without, even if you never use them.
- Selling your cores. A customer who supplies us with cores is a customer we allocate to first when stock is tight. That is not a policy we advertise, but it is true of every yard.
- Asking early. The difference between hearing “we are short in June” in February and in May is the difference between a plan and a problem.
And if there is a real one
You will know, because it will be visible in new-pallet lead times rather than in recycled availability. Recycled markets tighten after new markets do, not before, because the substitution runs in that direction. Watch lead times at a new-pallet builder, not price at a recycler.