PLA analyzed key macroeconomic and industry-specific data to provide insight into 2025 pallet market behavior. Here's what retailers and manufacturers can expect for recycled wood pallet demand and pricing in 2025.
What drives Recycled Pallet Pricing?
PLA monitors various macroeconomic and industry-specific indicators that we've determined to have statistically significant correlations to pallet demand and pricing. The full results of this analysis are available here.
At a high level, there are four market drivers of recycled pallet pricing that every pallet user should understand:
- Demand: The most obvious driver of pallet pricing is pallet demand, which is why PLA monitors macroeconomic factors such as GDP, Consumer Spending, Retail Sales, and Manufacturing Output. Barring any mitigating factors (such as high retailer product inventories, as discussed below), the more products consumers purchase, the more retailers order from manufacturers, and the more manufacturers produce and ship, the more pallets are needed for those shipments.
- Recycled Pallet Companies' Inventories: While every pallet company is acutely aware of both their own pallet inventory and that of their competitors, most retailers and manufacturers don't factor this in when they receive a pricing proposal. When recycled pallet companies sit on high levels of core or finished goods inventory, they typically offer lower prices to move that inventory. Conversely, when inventories are low, prices increase. Even a single pallet company with high inventory impacts their market’s pricing. In 2024 we had record-high inventories, now down to historical norms
- Core Pricing: Cores are (almost always) the largest single cost in a recycled pallet. When cores are in low supply or high demand, prices increase. Core supply is driven by Retail Sales velocity and inventory levels – the longer retailers hang on to products in their DCs, the fewer cores enter the market. It’s also driven by retail behavior – changing pallet requirements for suppliers, reuse of pallets in the DC, and other factors impact the quantity and quality of cores entering the market.
- Lumber Pricing: Recycled pallets start their life as new pallets, and higher lumber costs mean higher costs to build new pallets. When new pallet prices rise, some users switch to combo (mix of new and recycled components) or recycled A-grade pallets to reduce costs. This increases demand for As, raising prices, which in turn pushes some users to switch to Bs to reduce cost, raising prices for Bs. The impact is not felt immediately, but during periods of elevated lumber costs, recycled pallet pricing will follow.
With a foundation of these main drivers of recycled pallet pricing, we can understand what happened in the wood pallet market in 2024 and, more importantly, know what to expect in 2025.
Understanding the 2024 WOOD Pallet Market
The past few years have been exceptionally volatile for recycled pallet pricing, leaving pallet suppliers and their customers struggling to keep pace with the rate of change. 2024 was no exception, with three of the four main drivers of pallet pricing behaving in historically atypical ways.
Stagnant Demand
Although 2024 U.S. economic growth exceeded analyst expectations, due in large part to continued robust consumer spending (~70% of GDP), retailers were able to meet consumer demand with existing inventory as the effects of the 18-24 month “great destocking” bled over into 2024. As a result, the economic tailwinds of GDP, Consumer Spending, and Retail Sales did not reach the pallet market as they have historically, and demand for pallets stagnated.
2024 Performance of Demand Drivers and Correlated Markets
Source: Federal Reserve Bank of St. Louis
Oversupply of cores
The “great destocking”, combined with the hangover from pandemic-era tightening of pooled pallet supply causing an atypically large share of recycled pallets in retail supply chains, resulted in a glut of cores across the country. This glut led to record high core and finished goods inventories at pallet recyclers and historically low core pricing.
Result
On average, recycled pallet prices fell significantly between January and December of 2024, with the magnitude of change highly dependent on grade and market. Pricing in the Lumber, Freight and Recycled Paperboard markets (which correlate highly with the pallet market) also decreased over the prior year, though Recycled Paperboard/OCC and Freight did begin to recover slightly near the back half of 2024.
2025 Wood Pallet Market Outlook
We enter 2025 with positive economic momentum and more stable inventory positions across the supply chain, but many unknowns remain. Here's where analysts think we will land for the year ahead, and what their predictions forecast for recycled pallet markets.
Increasing Demand
Analysts forecast that baseline economic strength combined with interest rate cuts and a boost from pro-growth policies from the new administration should support continued growth. Manufacturing industry analysts predict higher production as lower interest rates enable deferred investments in new facilities, equipment, and other capital projects, and retail sales boost demand. In addition, many retailers are building inventory to offset looming tariffs, so this uptick in pallet demand should now pull through to the market unlike in 2024.
2025 Forecasted Performance of Demand Drivers and Correlated Markets
(Sources: Various)
Increasing Core Pricing
The core glut of prior years has subsided as retailers emerge from the "great destocking" into more normalized inventory levels, and even begin a (thus far short-term) inventory build ahead of tariff implementation. Combined with the predicted uptick in pallet demand outlined above and normalized recycler inventories, demand for cores is expected to increase to levels in line with historical ranges.
Rebounding of Correlated Market Pricing
Lumber industry analysts expect prices to increase significantly in 2025 as supply tightens and Canadian mills respond to looming tariff impacts by threatening a 25% increase on all lumber after tariff implementation. Many mills are also shifting volume to domestic markets, constraining supply and further driving up costs. In addition, if tariffs are enacted at the levels currently proposed, analysts report many Canadian mills will shutter as already thin margins will not be able to support additional tariff pressure. Both Freight and Recycled Paperboard market analysts predict their markets have bottomed, and many paperboard mills have already announced Q1 increases.
Result
Lower recycled pallet inventory levels, continued strong demand, and slightly elevated core pricing are predicted to lead to increased recycled pallet prices in 2025. Pallet users can expect additional price pressure on A grades as lumber prices increase new pallet pricing, driving some users to switch to As to reduce costs. Near term, B-grade GMA pricing is expected to remain relatively stable in markets with elevated recycler inventories, but by Q2, expect inventories to have been drawn down to target levels, resulting in price increases across the country in the second half of the year.
Risks and Opportunities
The recycled pallet industry faces the same risks as the rest of the supply chain, from the impact of tariffs to port strikes to natural disasters. Despite these unknowns, pallet users can prepare for what's ahead in 2025 by proactively looking for cost-mitigation opportunities in their supply chain.
- Review Your Pallet Specifications: Price increases are already being felt in the A-grade market, with more upward pressure to come soon. Review your current pallet specs relative to your customer and operational requirements to identify opportunities to shift volume to a lower-cost spec and prepare operations to be flexible when prices increase.
- Map Your Pallet Flows: Review each location’s pallet purchases, use, and core volumes. Some high-volume facilities may be able to lower costs with an on-or off-site repair and return program. Some facilities may be candidates for a freight sharing program to reduce costs.
Retailers and manufacturers do not need to navigate the pallet market alone. The supply chain and logistics experts at PLA are knowledgeable about each market and ready to help you develop your 2025 pallet program. Drop us a line and see how we can help.
Sources: BNY 2025 Outlook (link) | The Conference Board (link) | Federal Reserve Bank of St. Louis (link) | Deloitte 2025 Consumer Products Industry Outlook (link) | Ameriprise Financial 2025 Market Economic Outlook (link) | Bain & Company (link) | Reuters (link) | Deloitte 2025 Manufacturing Industry Outlook (link) | Manufacturing Today (link) | Transport Topics (link) | FreightWaves (link) | RXO The Curve Q4 2024 (link) | Barden Building Products (link) | Fastmarkets (link) | National Association of Home Builders (link) | Packaging Dive (link) | Fastmarkets (link) | Resource Recycling (link) | Federal Reserve Bank of St. Louis Produce Price Indexes (link) | Bank of America Institute (link) | Recycled Record (link) | Sea Intelligence (link) | PLA Internal Data | Timber Industry News (link)
