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As we frequently remind our readers, the future is uncertain, and market conditions can change rapidly, particularly in light of ongoing tariff discussions. Currently, the US has delayed imposing tariffs on Canada and Mexico by one month. For now, we are assuming those tariffs will not take effect – and that China’s tariffs will.
With that in mind, here are Fastmarkets’ three key predictions for the 2025 pallet market.
Want to see the data behind this outlook? You can fill in the form at the bottom of this page to see the data story.
Even though we do not yet have December and January import data, previous years’ trends — including unusually strong November figures — show a surge in imports from China and analysis suggests that this was largely driven by frontloading in response to anticipated tariffs. Additionally, a recent study by the Federal Reserve of Kansas City showed that when tariffs on Chinese EV batteries were announced in May 2024, a similar trend occurred.
A CNBC supply chain survey found that key imported items were pulled forward to avoid tariff hikes, with the most frequently pulled forward being apparel, appliances, housewares, and auto parts, which are all pallet-intensive goods. This heavy frontloading, particularly from China, suggests a potential bullwhip effect in 2025, where imports could decline after the late 2024 surge.
This import trend has contributed to elevated inventory levels across multiple industries. If sales do not increase significantly in 2025, companies will likely work to right-size inventories, slowing the growth of containerized imports. As a result, the industry may experience slower demand for new shipments, but higher demand for storage solutions—including pallets.
Companies holding surplus inventory require more pallets for warehouse storage, particularly in industries like retail, manufacturing, and food & beverage, where goods are stockpiled before distribution. Additionally, when goods remain in storage longer, pallets stay in circulation instead of being quickly recycled, increasing purchases of new pallets if businesses deplete their stock. This prolonged retention of pallets, combined with continued high inventory levels, could also contribute to higher prices in the pallet market.
The inventory-to-sales ratio — a key metric for understanding how long it takes businesses to sell their current stock — has consistently risen since 2021. This ongoing surplus should sustain demand for pallets well into 2025 as companies work through existing inventory.
Pallet pricing is largely driven by supply, as demonstrated by the extreme volatility during the COVID-19 pandemic due to supply chain disruptions. Over the past two quarters, pallet prices have stabilized after a prolonged decline beginning in 2022.
While this provides some relief to producers, several factors are preventing a significant price rebound, namely the surge in imports due to ILA strikes and proposed tariffs temporarily increased supply, alongside the inflationary pressures and the threat of tariffs weighing on consumer spending, limiting demand growth.
Despite ongoing economic uncertainty, mortgage rates are expected to remain above 6%, limiting affordability and demand in the housing market. However, homebuilders can offer rate buydowns to drive new home sales, supporting continued growth in single-family construction. This will, in turn, increase demand for framing lumber, which low-grade lumber used in pallets largely tracks. While this could push pallet prices higher, the rise will likely be moderate due to excess inventory, import surges, and economic uncertainty.
Fastmarkets’ proprietary cost model for a new western softwood GMA A-grade stringer pallet shows that pallet wages account for approximately 10-20% of a pallet’s total price, depending on the region. As labor costs rise, this portion of the cost structure will have a direct impact on overall pallet pricing and profitability.
In our January newsletter, we highlighted that new immigration policies under President Trump may further restrict the availability of workers. Executive actions, such as declaring a national emergency at the southern border and shutting down the CBP One app—a key legal pathway for migrant workers—are likely to tighten the labor pool. Given that the pallet industry relies heavily on immigrant labor, these policy changes could exacerbate existing workforce shortages.
At a national level, wages in the pallet industry have consistently lagged wages in the manufacturing sector at large by 15-20% over the last few years. With a constrained labor supply for manual labor, pallet wages are likely to rise in the latter half of 2025 as companies compete to attract and retain workers. Many pallet producers have already reported persistent hiring challenges, and a further contraction in labor availability may accelerate wage inflation across the industry. If pallet prices fail to rise proportionally to labor costs, manufacturers could face significant financial strain, increasing the likelihood of mill closures and further tightening pallet supply in the market.