Buying & selling
What changed in pallet pricing this year
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We publish this every January partly for customers and partly to keep ourselves honest about what we said last year.
Short version: recycled Grade A held almost exactly flat, Grade B softened by about six per cent, core buyback rates stayed stubbornly high because supply remains tight, and the premium for new pallets narrowed for the first time in four years.
The numbers
| Quarter | New | Grade A | Grade B | Core buyback |
|---|---|---|---|---|
| Q1 last year | $21.50 | $10.60 | $7.60 | $6.30 |
| Q2 last year | $21.00 | $10.80 | $7.40 | $6.40 |
| Q3 last year | $20.50 | $10.75 | $7.20 | $6.50 |
| Q4 last year | $20.00 | $10.70 | $7.10 | $6.50 |
| Year average | $20.75 | $10.71 | $7.33 | $6.43 |
| Prior year average | $22.10 | $10.65 | $7.80 | $6.10 |
| Change | −6.1% | +0.6% | −6.0% | +5.4% |
Why Grade B softened while Grade A held
This is the most interesting line in the table and it is not a price story. It is the automation story: demand has been migrating from Grade B to Grade A for five years because automated warehouses cannot use a pallet with a companion stringer.
The result is a market where the cheaper product is the one under pressure. That is unusual, and it has a real consequence for buyers: the Grade B discount is now larger than it has been since 2020, and if your operation is genuinely manual, this is the best relative value in the market.
Why core buyback went up in a softening market
Core supply on the Front Range is tight and has been since 2021. The reason is structural rather than cyclical: several regional recyclers consolidated, warehouse construction in the north metro increased the number of pallets in circulation without increasing the number coming out of circulation, and more generators now sell rather than skip.
That last one is partly our doing and it is a genuine competitive problem for us. Every company that stops skipping pallets increases the number of buyers competing for the same cores.
Freight
| Distance from the yard | Prior year | Last year |
|---|---|---|
| Denver metro (< 25 mi) | 11% | 10% |
| Front Range (25 – 90 mi) | 19% | 18% |
| Colorado, beyond Front Range | 27% | 26% |
| Out of state, truckload | 31% | 29% |
Down slightly across the board, and almost entirely because of route pairing rather than because of fuel. Paired runs went from 64% to 71% of our routing.
What we expect, with appropriate humility
We do not forecast pricing and anybody in this industry who does should be asked what they said in January 2021. What we will say:
- Core supply is unlikely to loosen. The structural drivers are still there.
- The Grade A / Grade B spread will probably widen further as automation penetration continues.
- New-pallet pricing has a higher floor than pre-2020 and we see no sign of that reverting.
- Freight is the most controllable line for most buyers and the one they think about least.
What we got wrong last year
We said in last January's note that we expected new-pallet pricing to hold and recycled to firm slightly. New fell six per cent and recycled Grade B fell six per cent. We were wrong on both, in the same direction, which suggests we were reading a supply signal and missing a demand one.
Specifically, we underestimated how quickly automation would pull demand away from Grade B. That is the correction we have made in how we think about the market, and it is why this year's note spends so much time on it.