May saw more underwhelming pallet demand driven by the slowdown in overall shipment of goods amidst the ongoing international trade re-negotiations. US pallet sales volumes were less than most internal forecasts predicted and the market continues to be largely supply driven with modest low-grade lumber price deflation resulted in slight downwards pressure on pallet prices.
Despite the overall trend, western softwood low-grade lumber largely held its ground moderating downwards pressure for new pallets in the West Coast markets.
This edition of the pallet newsletter includes:
- Latest prices for new and used pallets across six key metro hubs
- Analysis of the impact of the latest developments in US trade with China and other countries
- Insights into the continued rise of pallet wages and the knock-on effect that has had on the industry
Fastmarkets price assessments
Fastmarkets again assessed the Pallets, softwood, new GMA delivered Seattle market at $11.00-16.50 per pallet on May 28.
Seattle also saw used pallet prices hold firm along with new and used pallet prices in the San Francisco market and new pallet prices in the LA market. Trading in these markets remained range bound with a slight shift in sales volume centration towards the lower end of the reported price ranges.
In perhaps a harbinger of future market direction absent a significant shift, the re-use market in Los Angeles declined under pressure from falling Port traffic. The Port of Los Angeles is the largest in the US in terms of overall container volume, trade volume, and cargo throughput.
In May the Port saw incoming shipping volumes by more than 30%. Fastmarkets assessed the Pallets, softwood, used grade-A GMA, delivered Los Angeles market at $12.50-17.50 per pallet on May 28, a decline of $0.75 to the low and $0.50 to the high.
Fastmarkets also assessed the Pallets, softwood, used grade-B GMA, delivered Los Angeles market at $5.00-9.00 per pallet on May 28, a decline of $1.00 on the high largely driven by falling used grade-A prices.
Chicago (the country’s largest rail hub) and New York (the country’s largest foreign import destination) saw similar pressure to the used grade-A markets. Fastmarkets assessed the Pallets, softwood, used grade-A GMA, delivered Chicago market at $8.00-12.00 per pallet on May 28, a decline of $1.00 to the low.
Fastmarkets assessed the Pallets, softwood, used grade-A GMA, delivered New York market at $7.00-12.00 per pallet on May 28, a decline of $0.25 to the low and $0.50 to the high.
Notably, the Chicago and New York markets are also the largest foothold hardwood pallets have among major markets. Hardwood Market Report’s Northern Green 4/4 RW pallet cant prices have remain fixed at $240.00 for several years now keeping the market particularly sensitive to falling softwood low-grade prices.
This month saw a steeper decline to overall softwood low-grade pricing. The Random Lengths low-grade random dimension composite fell $30.00 in May to $309 as of May 22.
Sam’s Club issues new block pallet directive
In other major news, Sam’s Club recently updated their inbound pallet requirements to a new policy of only accepting block pallets. GMA string-style pallets, CHEP Europe designs, and corrugated/paperboard pallets are no longer compliant. Non-compliance may result in fees. The new requirements are listed as follows:
- 48” x 40” nine-block configuration with full four-way entry
- No cracks >1/8” wide and 15” long on deck boards
- Flush or countersunk nails only
- Prohibits the use of false bottoms, pallet skirts, stapling/gluing product to pallet
- Top deck boards: Four 5.5” and five 3.5” wide boards (all 5/8” thick)
- Bottom deck: Two 5.5″ x 40″ and three 5.5″ x 37″ boards (5/8″ thick)
- Blocks: Nine solid wood blocks of specified dimensions
- Maximum pallet weight (loaded): 2,500 lbs for iGPS/standard pool pallets
Another major retailer adopting a block standard certainly had folks in the industry discussing the future of pallet design. Despite all of the intriguing points, counter-points, and prognosticating – it is worth noting that the bulk of Sam’s Club’s pre-existing supply had already switched to a block standard.
Impact of the new directive
Pallet producers, poolers, and brokers reported little to no change in sales volumes based on the new policy. At roughly 30% of the current pallet industry, GMA pallets continue to be the most popular pallet design choice with a wide variety of applications.
While estimates vary, block pallets have seen a significant growth in market share over the last several years with recent estimates now around 20% of the market. Retail mandates have certainly helped solidify the block pallet as a serious contender.
As automated warehousing technology continues to accelerate towards pragmatic feasibility and economies of scale, the predictability and uniformity of block pallets are becoming increasingly valued. There are no updates on the Section 232 investigation as Department of Commerce officials continue to keep a lid on leaks.
Traders continue to eye those results as well as news regarding the ongoing trade negotiations.
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.
Tariff truce sparks trade frenzy but bottlenecks loom
On May 12th the US and China reached a temporary trade truce, agreeing to a 90-day pause in escalating tariffs. The agreement, which took effect on May 14, saw the US reduce tariffs on Chinese imports from a peak of 145% to an effective rate of 30%. In return, China suspended some of its retaliatory tariffs back down to 10% from a high of 125%.
Investors were pleased by the depth of the agreement – as seen by the rebound of the main stock indices back to levels higher than before the Liberation Day tariffs – which also signaled that Treasury Secretary Scott Bessent had taken firm control of trade policy, something markets welcomed.
While the pause offered momentary relief, it is far from a full resolution. A notable short-term surge in US-China trade can be expected during the truce as companies rush to frontload orders before the window closes, mirroring the trade behavior seen earlier in the year when firms rushed to beat looming tariffs.
This urgency is magnified by timing. As holiday shipments typically leave China in August and September, uncertainty around whether a permanent deal will be reached has led importers to accelerate purchases. The head of Los Angeles Port, Gene Seroka, has predicted that businesses supplying key goods like healthcare products and sellers of seasonal goods like Christmas toys might use this moment to restock, the 30% tariffs still in place remain prohibitively high for a lot of goods. For these companies, they are set to wait it out until more clarity is obtained for their business outlooks.
In turn, this reduction in imports has led to fears of shortages for a lot of staple goods. While companies did take the opportunity to frontload before the tariffs came into effect, their inventories are depleting fast with some retailers saying their warehouses will be 10% full come the middle of June. This sharp contraction in trading volume is not welcome for pallet manufacturers who will face less demand from pallet buyers.
The ordering frenzy mentioned above is colliding with tight freight capacity. The freight industry, just emerging from a two-year post-Covid recession, was counting on a rebound in 2025. But the sudden tariff hike in April triggered order cancellations and business closures. Now, with the 90-day pause reviving demand, there are too few carriers left to meet it. Sea-Intelligence reported 90 blank sailings across April and May on the Asia–North America trade routes, setting the stage for shipping bottlenecks, especially on the West Coast.
It is key to note though that the data is already showing some rerouting of trade from China through other countries, as the cost of producing in China whilst adding an extra destination en route to the US is still far cheaper than any viable alternative. In April, Chinese shipments to the US plunged 21% year-over-year whereas exports to the ASEAN bloc surged 21%. Consequently, Vietnamese exports to the US rose 34% year-on-year, and Malaysia saw a similar surge of 45.6% over the same period.
The longer-term picture remains murky, especially in respect to where things will stand after the 90 days of the US-China truce, as a full trade agreement usually takes longer to finalize when comparing to precedents from Trump’s first term. However, it seems the Trump administration is intent in fast-tracking a lot of negotiations with major trading partners, having reached a broad agreement with the UK already. The Trump administration also delayed imposing 50% tariffs on the EU until July 9th after the trading bloc agreed to fast-track negotiations.
Offsetting trade forces bring temporary stability to pallet production
After a volatile year, the pallet industrial production index rose by 0.7% from March to April, offering the first real sign of stabilization in output. As alluded to above, tariffs are beginning to see some market participants adjust accordingly to the stop-start nature of these tariffs, while a subset remain paralyzed due to the trade uncertainty, or tariffs that have left margins too small.
This has had downstream effects on the pallet industry with the trade surge seen in March and early April – the Liberation Day tariffs came into effect on April 9th – causing an uptick in production before the cold reality of the tariffs kicked in to temper the recent production increase.
De minimis shipments—packages under $800 sent directly to consumers—also remain in focus and are a notable example of the “all-or-nothing” trade environment being created due to the high numbers used for tariff rates. While not included in the joint statement with China, President Trump signed an order lowering duties on these parcels to 54% from 120%, effective May 14.
That’s a meaningful shift, as more than 90% of all US e-commerce imports come in through this channel, with roughly 60% of the de minimis packages coming from China via platforms like Temu and Shein. The adjustment may support parcel volume but won’t meaningfully offset the broader slowdown in containerized trade.
With retail restocking expected to proceed cautiously and freight bottlenecks still looming, April’s slight rebound in pallet production doesn’t yet mark the start of a sustained recovery for pallet demand.
Price plateau could be short-lived as section 232 tariff threat looms
The pallet producer price index continues its sideways trajectory, seeing a slight uptick in March’s and April’s prices. This has been driven by the surge in demand for pallets at the start of the year in the face of frontloading before the tariffs.
However, once we have all of May’s data, we can expect to see a fall in this index as Random Length’s weekly prices for low-grade lumber – the primary input for pallets – have shown persistent declines in previous weeks due to the uncertainty plaguing the industry.
Looking ahead to the remainder of the year, the outlook for pallet input costs remains unclear. The ongoing Section 232 investigation into timber and wood products – launched by President Trump’s executive order on March 1 – still looms over the market and doesn’t appear to yet be priced into the market.
The Department of Commerce must deliver its findings by November 26, 2025, and in our current forecast, we now assume new tariffs of around 25% will be imposed on most wood products in the fourth quarter and remain in effect through the end of 2026.
For pallet manufacturers, this does have some impact on input costs, but to a lesser extent than other wood product industries due to having a reduced exposure to imported low-grade lumber. We are assuming a carveout for Canadian softwood lumber, given that countervailing and anti-dumping duties (CVDs and ADDs) are already in place and expected to remain at historically elevated levels of a combined 34%.
While the US now appears more intent on avoiding escalation with key partners, the introduction of Section 232 tariffs – even with carveouts – would still inject volatility into the pallet market for manufacturers that are close to the borders, eventually seeing some knock-on effects to the rest of the market.
Pallet cost model
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.
April’s pallet costs stayed mostly from March across most metro hubs in light of the stagnation mentioned above. However, Dallas saw a 9% increase in its #3 grade lumber input costs, and a 5% increase in its #4 grade lumber input costs.
Labor market pressures keep pallet wages rising despite low deportation numbers
Pallet wages have continued their steady rise from recent months which, as we’ve mentioned in previous newsletters, is mostly determined by the stiffer competition in retaining labor forces for manual jobs.
So far, the Trump administration’s immigration enforcement has focused more on optics than large-scale action. In recent months, the Department of Homeland Security has released a steady stream of professionally produced videos highlighting high-profile raids, ostensibly to deter immigration.
However, actual deportation numbers remain modest by historical standards – roughly 65,000 during Trump’s first 100 days – and fall well short of the pace required to reach the administration’s stated goal of over one million removals this year. As a result, the broader impact on the labor market has been limited, affecting only a small segment of the undocumented workforce.
Tariff pressures look to shift the supply curve
With uncertainty still surrounding the timing and magnitude of potential Section 232 tariffs, the lumber market has so far priced in little additional tariff risk. In April, the Framing Lumber Composite Price (FLCP) averaged $484 per MBF—unchanged from March and the highest level recorded since October 2022.
However, May’s average is on track to slip slightly to $480 per MBF, as broad corrections across species and dimensions signal a market in synchronized retreat.
The Low-Grade Lumber Composite Price (LGLCP) rose marginally to $347 per MBF, up 1% from March’s prices. Despite not having a full month’s worth of data for May to get the average, the latest price on the 22nd of May was $309 per MBF, reflecting an 11% fall from the April average.
This is mostly attributable to the highly uncertain economic environment seen in May, still leaving a substantial number of players in the market to sit out until they see a clear direction for the coming months that they can plan for.
Low-grade lumber prices follow framing lumber, as it’s a byproduct of framing lumber production. The housing market often leads pallet price trends, making it a key industry for market participants to monitor.
Adding complexity to the outlook is the steep rise in Canadian softwood lumber duties. In April, the US Department of Commerce announced that preliminary countervailing duties (CVDs) for the average Canadian producer would increase from 6.74% to 14.38%.
This followed March’s announcement that anti-dumping duties (ADDs) would rise from 7.66% to 20.07%. Combined, these duties are expected to total roughly 34%—the highest since the expiration of the Softwood Lumber Agreement in 2015.
These elevated duties will raise breakeven costs for Canadian mills, likely resulting in reduced exports to the US. By year-end, we expect most Canadian lumber to face a 34% combined duty, while other offshore suppliers will face a 25% tariff under Section 232.
The resulting pullback in supply is expected to push prices higher, as US sawmills will not be able to ramp up output fast enough to fully compensate for lost imports. This supply-side squeeze will likely drive a new, higher price equilibrium.
Despite these upward pressures, our updated forecast for the FLCP in 2025 has been revised down to $466 per MBF. This revision reflects the likely delay in implementing Section 232 tariffs and the exclusion of Canadian softwood lumber from the investigation, as the US appears to be backing away from escalating tensions with key trade partners. Still, this would represent a 16% increase over the 2024 average, reinforcing a cautiously bullish outlook for lumber prices through the remainder of the year.
Diverging regional trends and mortgage unaffordability set to blight the housing market in 2025
According to the US Census Bureau, total housing starts rose modestly in April to a seasonally adjusted annual rate of 1.361 million units, up 1.6% from March. But this topline gain masked divergent trends beneath the surface. Single-family housing starts dropped 2.1% to 927,000 units—their lowest level since July 2023—while multifamily starts jumped 10.7% to 434,000 units, the second highest reading since late last year. Meanwhile, building permits—a leading indicator of future activity—fell 4.7% to 1.412 million units, suggesting softness ahead.
Regional trends were equally polarized. The US South saw an 11% rise in starts, driven largely by strength in apartment construction. In contrast, the West recorded an 11% drop, making April its weakest construction month since March 2023.
Builder confidence is also waning. The NAHB/Wells Fargo Housing Market Index (HMI) fell six points to 34, just above its lowest point since late 2022. Builders are navigating a difficult environment shaped by high mortgage rates, supply chain concerns, and renewed tariff uncertainty. The recent spike in the 10-year Treasury yield following the announcement of the tariffs in April has kept mortgage rates elevated, further limiting affordability.
That affordability gap is now reflected in consumer strain. FHA mortgage delinquencies, which typically attract first-time buyers because of the loans’ small down-payment requirements, rose to 11% in Q1, which outside of the pandemic is the highest since 2013. And according to the National Association of Realtors, the income needed to qualify for a mortgage jumped to $101,376 in 2024, up from $49,008 in 2020. Wage growth hasn’t kept up with home prices and borrowing costs, curbing buyer activity.
Given the ongoing affordability crisis and sluggish momentum, we continue to expect only modest downside for total housing starts in 2025 which we forecast to decline by less than 1%. Weakness in single-family starts is expected to be partially offset by stronger-than-anticipated multifamily activity.
However, from a wood demand perspective, this offers little relief, as apartments consume far less lumber per unit than detached homes. As a result, we maintain a bearish view on wood product demand in 2025, with a more meaningful rebound in starts—and in wood consumption—anticipated in 2026, when we project an 8% increase in total starts, driven by improved mortgage accessibility.