August 2025
December 2025
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.