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Pallet prices are declining as economic stagnation continues to impact demand across the US market. June saw softer pallet pricing due to low sales volumes and persistent economic challenges. Thin profit margins have limited drastic price declines for now.
Trade policy uncertainties have disrupted freight flows, reducing import activity and affecting pallet supply cycles. Lower Chinese imports and slower goods movement have added pressure to new and reused pallet markets.
Weakness in housing and manufacturing is dampening demand for pallets tied to construction and supply chain activities. Meanwhile, the lumber market is also under pressure, with declining low-grade lumber prices influencing pallet production costs.
Despite the economic hurdles, pallet suppliers have resisted aggressive discounts, citing tight margins. Trade negotiations remain a potential bright spot, offering hope for improved market conditions.
June’s persistent economic stagnation resulted in softer pallet pricing, but thin producer margins mitigate downside pressure for now.
US pallet sales volumes continue to underwhelm with pallet manufacturers, poolers, and buyers all reporting slower than hoped for business activity. The persistent weakness resulted in additional competitive pressure and while pricing was largely stable, trading ranges for new pallets slipped slightly to the downside. The reuse market faced similar pressure, but was slightly more resilient. In both cases, producers stressed – and buyers acknowledged, that current price levels are stretching profitability thin.
Fastmarkets again assessed the Pallets, softwood, new GMA delivered Seattle market at $10.75-16.25 per pallet on June 25, a – $0.25 decline to both the low and the high from the previous week.
This correlated with comparable – $0.25 declines to the low and the highs of new pallet prices in both the San Francisco and Los Angeles markets.
The decline to new pallet prices on the West Coast was largely driven by cheaper western softwood prices and the general slowdown in the movement of goods. While there is some reason for optimism due to ongoing trade negotiations, the present tariff uncertainty has had a near-term impact on containerized cargo entering and leaving the US Port system.
At approximately 40% of all incoming goods and 30% of all export traffic the Port of Los Angeles is a bellwether for overall trade health. As reported last month, May saw incoming shipping volumes into the Port of LA down significantly on the month. The final tally saw traffic down 35% on May 2024. Notably this is largely due to a drop off in Chinese imports.
An examination of June stats indicate that headwinds have not let up with approximately 1/5 of previously scheduled arrivals cancelled this month. With Chinese and US tariffs still prohibitively expensive for many exporters and importers, containers are staying idle in LA ports and not being sent back to China to restock, which has created a bit of a logjam. This also lowers the supply of pallets coming back into the re-use cycle. However, ample front-loading of inventories ahead of the slowdown has resulted in a prolonged digestion phase of recent new and re-use production.
Fastmarkets assessed the Pallets, softwood, used grade-A GMA, delivered Los Angeles market at $8.50-11.75 per pallet on June 25 a decline of $0.25 to both the low and the high.
Additionally, Fastmarkets assessed the Pallets, softwood, used grade-B GMA, delivered Los Angeles market at $5.00-9.00 per pallet on June 25, unchanged over the previous month.
Low-grade pricing slipped across species throughout the month adding to the bear thesis in what has recently been a very materials supply-driven market. The Random Lengths low-grade random dimension composite declined steadily throughout June from $301 on May 29 to $283 as of June 18.
Chicago and New York pallet prices proved to be slightly more resilient due to their marginal downstream insulation from the drop off in Chinese imports on the West Coast.Fastmarkets again assessed the Pallets, softwood, new GMA delivered Chicago market at $11.00-16.50 per pallet on June 25, unchanged over the previous month.
Fastmarkets again assessed the Pallets, softwood, new GMA, delivered New York market at $11.50.00-16.00 per pallet on June 25, unchanged over the previous month.
Softwood pallet producers in Chicago and New York were also assisted by a slight bump in hardwood lumber prices. Hardwood Market Report’s Northern Green 4/4 RW pallet lumber price rose $10 in June to $250. Lower log supply due to persistent rains and weak demand for other hardwood end-use categories played a role in restricting the supply of hardwood pallet lumber as most mills continue to operate well below capacity.
In the South, Southern Yellow Pine prices fell sharply. Fastmarkets assessed the kiln-dried, Southern Yellow Pine (westside), #3 2×4 random lengths price at $300 on June 18, a $60 decline from the May 29 assessment.
Despite the sharp decline in lumber prices, Dallas-Fort Worth new GMA, used grade A, and used grade B pallet prices remained unchanged this month – evidencing their relative affordability and the sluggish pace of the current marketplace.
Overall pallet supply remains relatively stable for the time being with most market participants expecting availability and pricing to remain relatively stable near-term. Producers continue to express concern about tighter low-grade supply with many continuing to express that low-grade prices may rise as a result in the near-future. Low-grade lumber suppliers meanwhile continue to report persistently weak demand driving recent price declines. Despite the headwinds, pallet manufacturers continue to remain closed to steeper discounts with tight profit margins counterbalancing downside pressure.
As Fastmarkets ramps up its coverage of the pallet market, we invite feedback on specific pallet-related items for future reports. Contact ian.templeton@fastmarkets.com with comments or to contribute future pricing information.
It has been a rollercoaster few weeks for the freight and logistics sectors, with much of the volatility tied to the rapid shifts in US trade policy during May. After a weak April marked by softer consumer spending and reduced business investment, May’s economic data showed a solid rebound – largely attributed to the temporary 90-day pause in reciprocal tariffs. The reprieve gave companies an opportunity to accelerate orders and adjust supply chains, but with a hard July 8th tariff deadline looming, the uncertainty is far from over.
This temporary window had clear consequences. The US trade deficit narrowed in April by the largest amount on record, driven by a more than 16% drop in imports. The sharp fall followed a surge in orders earlier in the year as companies rushed to beat higher tariffs under President Trump’s policy.
The ports of Los Angeles and Long Beach – America’s busiest container gateways – provide a stark illustration of this volatility. In May, they processed just 655,056 import containers, down 24% from April and the lowest import total since July 2023. Yet for the week beginning June 22, Port of LA data showed a 20% week-over-week gain and a 68% year-over-year jump in TEUs, hitting 134,000.
This brief uptick is expected to fizzle: volumes for the week of July 6 are forecast to fall 22% to 106,000 TEUs as companies brace for the possible reintroduction of steep tariffs. While Treasury Secretary Scott Bessent has suggested Trump may extend the trade deadline of July 8, many firms are choosing not to take the risk.
Longer-term supply chain shifts are also at play. China’s share of US imports continues to erode, with exports to the US down 11% year-over-year. Meanwhile, Vietnam and India – huge beneficiaries of Trump’s ire towards China – are up 21% and 13%, respectively.
All of this is feeding into the freight industry’s current malaise. While imports account for about 10% of trucking demand, the broader weakness in domestic manufacturing—traditionally the sector’s primary driver—is adding pressure. A disappointing produce season, hit by unseasonably cold spring temperatures in California and softer demand, is exacerbating the situation. This confluence of forces is already reducing demand for pallets and is likely to weigh on downstream sectors through the summer.
Looking ahead, if trade negotiations yield favorable outcomes and the current tariff regime is eased or clarified, we expect to see a renewed uptick in consumer spending. That would likely trigger another expansionary phase in pallet usage, particularly as supply chains return to a more normalized, growth-oriented rhythm.
Until that time comes, subdued demand appears likely, particularly when looking at empty outbound containers heading back to Asia to be refilled with goods. The chart highlights the drastic decline empty containers leaving the ports of Los Angeles and Long Beach, implying there is no rush for empties to go back to China and other Asian manufacturing hubs to be restocked. Notably, it also depicts the surge in empty containers during the pandemic when empties were a priority to get back to Asia so they could be refilled and returned to the United States, a time of voracious demand from the American consumer.
With tariffs on Chinese goods still prohibitively high, standing at 55% following the 30% increase announced in May on top of the 25% carried over from Trump’s first term, this trade environment appears likely to persist until a formal agreement is reached. So far, these tensions haven’t materially affected pallet prices. Fastmarkets’ proprietary pallet data shows that over the past 2–3 years, the much larger volume of imports compared to exports has ensured a steady flow of pallets into the US market. However, if trade deals with the US’s major partners are not finalized within the next 3–6 months, this imbalance could begin to reverse, making pallet availability a concern and putting upward pressure on prices as a result.
US pallet industrial production fell 3% month-over-month in the latest reading, reflecting a slowdown in commercial activity tied to weaker consumer spending. This contraction comes after many businesses front-loaded inventory movement in the first quarter, reducing the need for retail shipments in the second.
As pallet demand eases, suppliers are now contending with a tightening supply of recycled cores, the main driver for the remanufactured pallet market. Multiple suppliers have noted that core availability has worsened compared to six months ago, which is adding strain to the recycled pallet market, but is still not at levels that alarm bells should start ringing but the trend is certainly a key one to watch.
Meanwhile, inventory levels across the supply chain have continued to retreat to more normalized levels. While this has helped alleviate some upstream pressure, it also signals less buffer capacity, making the market more vulnerable to potential shocks in core supply or demand surges.
Despite a slowdown in inventory accumulation, the cost of holding goods continues to climb. According to the Logistics Managers’ Index (LMI), Inventory Costs rose by 2.8 points in May to a reading of 78.4 – the highest level since October 2022. This rise comes even as inventory levels remain relatively flat, creating a striking 26.8-point gap between the two metrics which is the third largest in the history of the index.
Typically, inventory levels and inventory costs move in tandem, reflecting supply chain tightness or easing. In 2024, the average spread between these metrics was just 12.1 points. The unusually wide divergence this year suggests that inventory brought in earlier – particularly during the Q1 front-loading ahead of expected tariff increases – is now sitting idle in warehouses, driving up storage costs.
Under normal circumstances, warehouse costs would ease when inventory growth slows. But the current environment is anything but normal. Warehousing capacity is tight, replenishment orders are limited, and goods are being held longer than usual, far more than would be expected in the typical trade boost approaching summer. This year, uncertainty around tariffs and concerns about consumer financial health are keeping retailers cautious. Many are refraining from placing full orders, opting instead to manage risk and hold off on restocking.
This increase in inventory holding costs helps to explain why the pallet producer price index ticked up slightly despite lumber costs having fallen steadily over the past two months. As long as pallets are tied up in static inventory flows, pricing pressure will remain elevated.
We continue providing detailed insights into the gross variable cost of producing a new softwood GMA A-grade stringer pallet across six key metro hubs. This model highlights a side-by-side comparison of costs depending on whether #3 or #4 grade lumber is used in production.
The model is based on the availability of softwood lumber and takes into consideration the delivery cost from the mill to the pallet facility, which is partly why we see a lower cost in Seattle and a slightly higher cost in New York.
We must caveat that while certain manufacturers will have lower costs due to a higher utilization of automation or economies of scale, these are our estimated averages for each of the metro hubs.
The total cost for each hub includes lumber and labor costs, labeled for each metro hub. It also adds uniform nail costs nationwide and miscellaneous expenses like gas, electricity, paint, and staples.
May’s expected pallet costs stayed mostly flat or fell due to the falling lumber prices, although this was most pronounced in New York which saw falls of 10% in both #3 and #4 grade pallets due to the lower input costs, although this doesn’t take into account the higher costs for holding inventory longer.
The US labor market is showing early signs of strain in sectors that rely heavily on immigrant labor – a concern that is especially relevant to the pallet industry, where a large share of the workforce is foreign-born.
In mid-June the Department of Homeland Security directed immigration officers to pause enforcement actions at farms, restaurants, and hotels, following pressure from Agricultural Secretary Brooke Rollins and industry lobbying groups. While this temporary pause was announced to ease immediate labor concerns in these sectors, the message from the administration remains mixed. Officials including Kristi Noem and Stephen Miller publicly stated that there would be no blanket exemptions, and ICE has clarified that it is not ruling out worksite enforcement at these locations. A White House spokesperson reinforced that deportation efforts are expanding in major cities, and that anyone in the US without legal status remains at risk.
This has caused a slowdown in employment growth in the foreign-born labor force to become more acute. Data from the latest jobs report revealed that the number of foreign-born individuals either working or seeking work fell by about one million between March and May. This marks the largest two-month drop in the foreign-born labor force since the start of the pandemic.
For the pallet industry, where physical labor and high turnover are common and immigrant workers fill many essential roles, these labor market shifts could become a growing challenge. If foreign-born labor continues to retreat, pallet producers may face tighter hiring conditions, wage pressure, and production delays heading into the back half of the year.
So far in 2025, pallet wage growth has reaccelerated after hitting a slight plateau between 2022 and 2024 when demand slowed and labor was more widely available, at least by pallet industry standards, which typically faces challenges in meeting staffing needs. Since Trump’s return to the White House, there’s been a pronounced steady upturn in pay rates to retain staff, some of whom may fear returning to work despite having the necessary documentation in light of recent ICE raids.
Despite ongoing uncertainty surrounding the timing and scope of potential Section 232 tariffs, the lumber market is currently pricing in minimal tariff risk. The Framing Lumber Composite Price (FLCP) fell to an average of $450 per MBF in May, down $34 from the prior month. Southern Yellow Pine (SYP), in particular, continued to weigh heavily on the index, offsetting modest rebounds seen in other species.
Looking ahead, Fastmarkets expects the FLCP to average $434 per MBF in June, a return to the same level seen in January. This signals ongoing softness in the market, driven largely by oversupply and weaker downstream demand.
The Low-Grade Lumber Composite Price (LGLCP), which is the index for the primary input for pallets and mostly follows the direction of the framing lumber market, declined 7% to $317 per MBF in May. This drop, from $343 in April, reflects continued pressure in the SYP market, where an excess of supply has pushed prices lower.
As a result of persistent SYP underperformance and reduced expectations for new construction activity, Fastmarkets has again revised down its FLCP forecast for 2025. We now anticipate an average of $452 per MBF for the year, $14 below last month’s outlook. While this still represents a 13% increase from the 2024 average, the forecast downgrade underscores that the market sees a weaker pricing environment ahead, even with the looming tariff uncertainty.
The US housing market continues to face a broad-based slowdown, with fresh data signaling a prolonged period of weakness in construction activity. Building permits – a key forward-looking indicator – fell 2.0% in May to a seasonally adjusted annual rate of 1.393 million units, marking the lowest level since April 2020. This suggests that homebuilders are pulling back sharply on future developments as demand wanes.
That pullback is already evident in actual construction activity. Total housing starts dropped 10% in May to 1.256 million units. While single-family starts inched up 0.4% to 924,000, the multifamily segment plummeted nearly 30% to 332,000 units, its lowest reading since November. The steep regional divergence further reflects the uneven state of the market – starts in the Northeast fell 40%, while the West posted a 15% gain on stronger single-family activity.
The weakness extends to the resale market as well. In 2024, US home sales hit their lowest level since 1995, and early signs suggest 2025 may fare even worse. April sales of existing homes fell 2% from a year earlier, while prices continued to rise—marking 22 consecutive months of year-over-year increases. Pending sales are also down in every region except the Midwest, according to the National Association of Realtors.
One particularly telling sign of market fragility is the increase in canceled sales. According to Redfin, nearly 500,000 transactions were canceled year over year, underscoring growing buyer hesitation amid affordability concerns and economic uncertainty.
From the perspective of the pallet and lumber markets, this continued weakness in housing is a key demand-side pressure point. Apparent lumber consumption through May is down 3 to 4% year to date, as fewer housing starts and slower retail construction filter upstream. Homebuilders, already planning for 2026, are scaling back expectations.
With fewer homes being built or sold, pallet demand tied to new construction, roofing materials, home furnishings, and related supply chains will likely remain subdued heading into the second half of the year.