Ukraine war will have long term impact on pallets in Europe

by Emily Atkins

The war in Ukraine and EU sanctions against Russia and Belarus will have a significant impact on the European pallet market, according to EPAL, the European Pallet Association.

The production of pallets is currently suspended in many factories in Ukraine due to the war. Also, wood for packaging and pallets is almost currently not being exported from Ukraine to Europe.

Last year, Ukraine exported more than 2.7 million cubic metres of sawn softwood timber, a significant amount of this for wooden pallets and packaging manufactured in European markets including France, Germany, Italy, the Netherlands and Poland. The country also produced and exported an estimated 15 million pallets, mainly to Europe.

Meanwhile, with Russia exporting approximately 4.5 million cubic metres of softwood timber into the EU (with Estonia, Germany, Finland the largest importers) and Belarus exporting approximately 3.1 million cubic metres (spruce and pine combined), Europe will be significantly impacted by trade sanctions that have been introduced against the two countries.

The sanctions against Russia and Belarus also mean that wood imported from these countries into all the European wood processing industries in recent years will no longer be available. There are also no truck drivers from Ukraine, Russia and Belarus which means potential delays in the transportation of materials and pallets.

Some countries source up to 25 percent of their pallet and packaging timber from the three countries. Alternative timber sources including Scandinavia, Germany and the Baltic States are only capable of covering a small proportion of the shortfall.

Both EPAL and European Federation of Wooden Pallet & Packaging Manufacturers (FEFPEB) support the sanctions and expressed their sympathies for the people of Ukraine.

“War and sanctions will also impact the production of EPAL Euro pallets in EU countries. In this situation, the use of exchange pallets helps to avoid or reduce pallet shortfalls as has always been the case when there has been a shortage of wood or the price of wood has risen. We therefore anticipate a significant increase in the demand for new EPAL Euro pallets,” said Robert Holliger, president of EPAL.

Cost implications

Energy supplies have also been severely disrupted, increasing the price of fuel, with growth in the price of gas of more than 30 percent, and the cost of a barrel of oil now more than US$110. This, says FEFPEB, will have a “significant impact” on the cost of heat treatment and kiln drying of timber to ISPM 15 standards, on transport and on the overall cost of production – leading inevitably to product price rises.

“The terrible events unfolding in Ukraine have had an immediate impact on industries of all kinds, disrupting vital trade flows, and reducing availability of many different materials and goods. The usual supplies of timber needed for the production and repair of wooden pallets and packaging have had been hit hard, and availability has been significantly reduced,” said FEFPEB secretary general Fons Ceelaert.

“Alongside the sizeable ongoing international challenges that already exist in the market, we expect to see a general upward trend in the price of all commodities, including wood. In the meantime, our member associations’ businesses around Europe are working hard to secure supplies from their partners in order to maintain continuity of pallet and packaging production.

Shortfalls and delays

EPAL expects there will be shortfalls and delays in deliveries in supplying users with new EPAL Euro pallets. At the same time, there will also be a significant increase in the demand for used and repaired EPAL Euro pallets in every quality class.

 “We recommend all EPAL Euro pallet users and their suppliers start planning their pallet usage for the whole of 2022 now and order EPAL Euro pallets early,” said Dirk Hoferer, vice-president of EPAL. “In this difficult situation, which will probably exceed the shortfalls of 2021, long-term and trusted delivery agreements between users and suppliers of EPAL Euro pallets will prove their worth.”

This was how significant disruptions to pallet and transport logistics were avoided during the wood shortage of 2021,

The anticipated shortfalls in the supply of wood and the increasing energy, transport and raw material prices will also have an impact on the price of pallet timber and EPAL Euro pallets. However, as wooden pallets can be used for many years and repaired economically, higher procurement prices can be offset by reuse, exchange and selling on as well as the fact that they can be repaired. EPAL licensees and the open EPAL Euro pallet exchange pool service providers will support users in this respect.