TRANSPORT and logistics group Brambles has warned that a global pallet shortage will probably drag on for another year, after it raised prices by 8% in the December half to help claw back $377 million in soaring timber costs.

The company has been battling to secure enough timber pallets because the pandemic has led retailers to lift stock levels in warehouses to ward off product shortages and stockpile empty pallets as a safeguard as supply chains buckle.

Brambles, which operates a pool of 345 million pallets, crates and containers across 60 countries – says timber prices are at record levels in Europe and Latin America.

“Unlike historic lumber cycles, which typically have been driven by either supply or demand factors, the current inflationary and timber availability pressure is driven by both supply and demand factors,” says chief financial officer Nessa O’Sullivan.

“On the demand side, we’ve seen housing booms and DIY increases while supply has been impacted by global shipping and transport bottlenecks, capacity constraints across sawmills and other inefficiencies due to scarcity of raw materials and labour shortages.”

The problem has been made worse by retailers and manufacturers holding increased ‘safety’ stocks of goods on pallets in warehouses and hoarding empty pallets. And while timber inflation impacts repair cost, the biggest impact is on capital expenditure investment, with timber representing more than 80% of the cost of a new pallet.

Chief executive Graham Chipchase said the company’s sheer size was a positive in such a tough market, and it was not losing any market share, but there would be no short-term let up in shortages.

“Everyone is struggling to get hold of pallets,” he said.

Lorraine Hughes, general manager of Pallet masters, which has been established in Brisbane for more than 35 years, understands the scenario.

“We’re looking after regular clients, but on longer lead times – three to five weeks because  flooding has impacted road deliveries to the factory at Clontarf. But the crunch is on for suitable pallet materials as timber shortages widen across Australia.”

Ms Hughes said scattered debris afar heavy rain over the past week and signs of mould had been a problem … “but we’re keeping our heads above the water.”

Craig Nisbet, CEO of Mount Gambier-based sawmill NF McDonnell & Sons, which supplies timber to pallet manufacturers, expects demand for pallet timber to outstrip production. 

“If you take the Victorian example the government policies around native forestry probably aren’t consistent with what industry would say is sustainable forestry,” he said. 

“Without [native forestry] we really need more trees in the ground and more investment in processing on a domestic front.” 

Mr Nisbet said it was imperative the industry worked out the supply-demand imbalance. 

CFMEU national secretary Michael O’Connor says the Australian Food and Grocery Council has warned unions and the Victorian government that supermarkets are continuing to face a critical shortage of household goods.

“Victoria is facing a dire shortage of timber due to the state government’s decision to end native logging by 2030,” Mr O’Connor said.

“The Premier needs to act urgently to get pallet production back up and running in Victoria, so the problems impacting pallet supply nationally aren’t being made worse by a log supply crisis here,” he said.

In a statement, a spokeswoman for the Victorian Government said the worldwide shortage of pallets and other timber products was due to a number of factors including trade issues, bushfires and the coronavirus pandemic.

The current litigation against the state logging company Vicforests was also placing additional strain on the availability of timber in
the state.