18 WESTERN PALLET
Fastmarkets
WPA Pallet Market Brief
In this pallet market brief, we take stock of current market conditions and highlight key indicators that point to where the sector may be heading. Our aim is to bring some clarity after a difficult 2025 and a two-month data blackout from the federal shutdown, which has left many market participants unsure about the outlook for both the wider economy and the pallet market.
In spite of a challenging year for consumers, retail sales have continued their upward trajectory. As shown in the graph that follows, while all other categories have flatlined in recent years, the engine for the sustained increase has been e-commerce (nonstore retailers) sales, increasing over 240% from January 2015 to August 2025.
This trend, coupled with recent developments around the de minimis tariff exemption, has the potential to reshape US import logistics in favor of pallet usage.
With President Trump’s executive order eliminating the de minimis exemption for commercial shipments below $800 effective August 29, 2025, and full enforcement by mid-2026, we may soon see a structural shift away from small-parcel imports toward bulkier, palletized container shipments, as exporters from Asia (companies like Shein and Temu were the main beneficiaries of this exemption) look for ways to cut shipping costs.
For pallet demand, this is a meaningful pivot. As parcel air freight gives way to containerized ocean freight, warehouse throughput increases, and palletized supply chains gain traction. Especially as direct-to-consumer brands pivot to avoid new tariff burdens, bulk shipping will likely boost demand for pallets used in cross-border intermodal freight and warehousing.
In terms of where we are in the current cycle, our US pallet consumption indicator provides some color on this.
A rise in production occurred beginning in Q2 of last year, which was likely spurred by procurement managers looking to mitigate risks from potential International Longshoremen Association strikes in October 2024 and January 2025. The increase then sustained into the beginning of 2025 as the risks of tariffs increased, and they looked to hedge their bets.
While year-on-year growth in this chart indicates that we may be entering a downcycle, this doesn’t indicate that the huge cyclical swings seen after the pandemic are set to continue. In fact, year-on-year growth changes from 2017 until the start of the pandemic were far more stable. Now that we’re set to get more clarity from tariffs in 2026, and the pallet market has faced a long correction from the large fluctuations during the pandemic, we should see more stability in the market going forward.
Falling availability of pallet cores to create recycled pallets suggests that we’re set to see improved demand for new pallets, as the fall in the availability, and eventually quality, of used pallets means that it will lose some of the price advantage it has over new pallets.
With respect to the hardwood and softwood composition of the pallet market, softwood has steadily taken a larger share over the past two decades. Hardwood production has been in steady decline, while softwood lumber has trended higher in recent years. Within the broader softwood category, the species mix is also shifting as southern yellow pine (SYP) sawmill output continues to ramp up, while other softwood species remain constrained by sawlog availability.
Fastmarkets’ pallet model indicates that total lumber consumption for wood pallets, including new pallet production and new lumber used for pallet repair, reached 9.5 BBF in 2024. Of this, softwood accounted for 6.7 BBF and hardwood 2.8 BBF. The growth in total lumber use is not surprising given the expansion in goods consumption over this period. What is more striking is the evolution of hardwood’s role in pallet production: since 2000, Fastmarkets estimates that hardwood’s share has fallen from 68% of all pallets produced to less than 30% in 2024.
Despite this negative trend, many hardwood species retain a structural advantage because of their higher density, strength, and durability. At the same time, the pallet market itself is changing quickly, driven by the rise of automated warehousing, robotics, scanning technology, pallet design systems, automated nailing lines, and greater on-site integration. In this environment, lumber mills have an opportunity to capture previously locked up market share if they position themselves carefully.
Competitive pressure in softwood low-grade markets has become intense, to the point where several specialty low-grade producers have been forced to curtail operations or close facilities as volumes shrink. Softwood mills are increasingly instructing their sales teams to hold the line on prices as post-pandemic profit margins approach uncomfortable levels. Tariffs on Canadian imports have added another layer of disruption, upending long-established trading patterns and reducing the flow of Canadian low-grade into the US.
At the same time, the spread of automated warehousing means pallets are receiving more scrutiny than ever. New scanning technology combined with machine-learning tools can now quantify lost revenue from downtime caused by pallet breakage. Defects that would previously have gone unnoticed can be detected and diverted into a repair queue before failure occurs.
Breakage rates and downtime are being quantified by large warehouse operations at a precision only previously dreamed of. As performance data becomes more granular and visible, the inherent durability advantages of higher-quality lumber may become more valuable to pallet users.
Just this year, we’ve seen Sam’s Club release a new directive that all pallets they receive must be block pallets, joining competitor Costco, which has had a block-only policy since 2011. Block pallets are considered by some to be more resistant to breakage and to have better overall performance in stacking applications, conveyor uses, and automated systems.
Opportunity abounds for buyers who look to maximize efficiency and minimize downtime in increasingly automated distribution centers.