Before I joined the business-to-business publishing world and had only a vague understanding of the supply chain, I was completely baffled by the number of “pallets for sale” signs on the highway from Los Angeles into the Central Valley via Bakersfield. Is there a bustling market for pallets just outside of LA, I wondered, or is it code for some illegal activity? I know better now. There are nearly two billion pallets circulating in the United States, according to a recent article in Forbes, and most of them are made of wood. But the glory days of wooden pallets may be dimming, thanks to a perfect storm of a spike in demand and soaring lumber costs, not to mention health concerns. The beneficiary? Plastics.
The global plastic pallet market is projected to reach a value of $10.4 billion by 2028, expanding at a 5.6% compound annual growth rate from 2021 to 2028, according to a report from Grand View Research. Demand for contamination-free shipping and a greater appreciation of the long-term cost benefits of plastic pallets are driving this growth, according to the report.
Plastic pallets can be easily cleaned with high-pressure jet spray and demand minimal maintenance. Wood pallets, on the other hand, are highly susceptible to moisture and pose a risk of sheltering bacteria, pests, or fungi, which can damage stacked food and pharmaceutical goods. In the age of COVID-19, that has taken on even greater significance, at least in the public mind.
While plastic pallets are more expensive than wooden pallets, the cost differential eroded as the price of lumber soared in the past year. Since reaching record levels in the spring, the price of lumber has fallen considerably and is back at the lower end of its historical spectrum, according to Fortune. However, plastic pallets are typically made from durable polymers, such as polypropylene (PP) and high-density polyethylene (HDPE), and will significantly outlast wood pallets. When making a cost comparison, the long-term service life of plastic pallets is a considerable asset in their favor, but it can also be a liability.
Because of their relatively high cost, plastic pallets are attractive to thieves. Misplacing or losing them also hurts the bottom line. Forward-thinking pallet suppliers have a solution — integrating RFID tags and other technologies that allow efficient tracking of the skids.
In the plastic pallet space, HDPE currently has the largest market share by revenue — 68.2% — owing to its sturdiness, availability, and low cost compared to PP, according to Grand View Research.