How is Wood Packaging Impacted by an Improved Economy and Housing Demand?

​So what does the cost of my wooden pallets and packaging have to do with an improved economy and greater new housing starts? 

The wood packaging industry depends on many of the same lumber producers that supply the housing industry. Lumber prices (especially softwood dimensional lumber) go up with increased housing demand. Those higher prices trickle down to the housing industry's by-product lumber that we use for building pallets and wood packaging.

Single family home new starts are predicted to be up by about 10%.

Signs of an Improving Economy
The US economy continues to improve, albeit at a very slow pace.

• Unemployment is down and consumer confidence is on the rise.
• New home starts are up 7% from 2016 and are predicted to be between 1.2 to 1.3 million for 2017.
• US lumber consumption is up and expected to be almost 50 Billion BDFT in 2017 and 52 Billion BDFT in 2018.

Speculation Driving Lumber Costs
The US is the world's largest consumer of wood products and the second largest producer. We depend heavily on Canada to make up the difference. The US and Canada need to finalize a lumber trade agreement amid the rise in lumber costs. Canadian imports could be subject to a 25% tax starting in mid-2017. Speculators are driving up wood prices in the US in anticipation of this looming tax.

Preparing for Increased Wood Prices
Growth and a strong economy are good for businesses and consumers, right? Yes and no. More jobs create a higher demand for housing and greater production creates more demand for wood packaging. Both of which equate to higher wood prices.

​As the cost of lumber continues to rise, how can you prepare your business for increased packaging costs? Is it time to redesign your wood packaging or start that return program you've thought about many times? Or... maybe it is time to consider an alternative material.

If you are concerned about the future of wood prices, now is the time to start asking questions about ways to save money. Drop me a line or ask your question in the comments below.

Post by: Rich Reiher, Vice President