Impact of COVID-19 on Global Lumber Pallet Market in Chemical and Materials Industry
ANALYSIS ON IMPACT OF COVID-19 ON THE GLOBAL LUMBER PALLET MARKET
The COVID-19 pandemic has influenced the whole planet with its major impacts on the economy and businesses across the globe. The COVID-19 spread worldwide in unprecedented ways due to its high infectious and contagious nature and lack of availability of its vaccine. As a result, the greatest medical challenge in the 21st century is yet to be faced by physicians worldwide. Though the emergence of the virus can be traced back to Asia, many European countries along with the U.S. have been struck massively by the pandemic. The virus has spread across all regions ranging from North America, Europe, Asia-Pacific, Middle East, and Africa up to South America. The COVID-19 has been declared as a pandemic by World Health Organization (WHO) due to its increased spread across the globe. After the declaration of the pandemic, various countries announced the complete lockdown, such as India, China, and other Asian countries to decrease its spread. According to the situation report of 7th June, 2021 by WHO stated 174 million cases of the corona have been reported globally and 3.7 million patients are dead due to the coronavirus. On a slightly positive note, a total of 157 million people have recovered and total of 1.9 million vaccine doses have been administered as well.
The spread of the COVID-19 virus has caused disruptions on wood availability which has seriously affected the production of lumber pallets.
A pallet is a flat transport structure that supports goods in a stable fashion while being lifted by a forklift, a pallet jack, a front loader, a jacking device, or an erect crane. A pallet is the structural foundation of a unit load which allows handling and storage efficiencies. Goods or shipping containers are often placed on a pallet secured with strapping, stretch wrap or shrink wrap and shipped.
Since its invention in the twentieth century, its use has dramatically supplanted older forms of crating such as the wooden box and the wooden barrel, as it works well with modern packaging such as corrugated boxes and intermodal containers commonly used for bulk shipping.
Wood prices rose due to reduction in mill operations and closures, combined with an upswing in domestic home improvements. Those consumers, who spend more money on the purchase of residence, now have lesser money which results in potential dampening of the economic recovery. Shortages of containers lag in unloading at ports shortage of commercial truckers had slowed down the road transport of lumber pallets.
Lumber features do not create cash prices; they do, however, generate a present view of an equilibrium price. If buyers are more eager than sellers, prices tend to go up. When the opposite is true, price tend go down. Softwood is the primary source for much world in production of lumber with traditional centres of production being the Baltic region and North America. These are indicating that in near future, North America will take over the worldwide market lead as the future contract specifies that lumber must be manufactured in certain specific U.S. states and Canadian provinces.
The spread of COVID-19 affected and disrupted the forest related supply chains, which have resulted in a sharp decline in exports and imports throughout the world. Across the global demand for wood and wood products, including tropical timber graphic paper and lumber furniture has decreased.
IMPACT ON PRICE
The outbreak of COVID-19 has caused a number of shortages in many sectors, including lumber industries as well. The pandemic spurred shortage has driven its prices too high. Demand of construction and the home remodeling during the pandemic coupled with coronavirus related limits on production caused the shortages that pushed the prices even higher.
However, after the pandemic, lumber prices fluctuated sharply in October 2020, by over 25 percent per week. This has been likely due to many factors, such as the typical seasonality in lumber demand (due to the end of construction season in some regions), increased processing capacity, and others. The price of lumber pallets increased considerably as sawmills were forced to close or slow production. However, prices still remained higher when compared with the same period in 2019.
IMPACT ON DEMAND
The demand for lumber material is disrupted due to the shutdown in every industries and construction & infrastructure. The effect of coronavirus declined the request for consumer, durable, and capital goods in many countries such as in the place like Brazil, Ghana, and Japan. Due to the ongoing outbreak of COVID-19, the global market of lumber pallet has been highly affected by the pandemic as many companies were operating in the field of lumber pallet. And they were obliged to stop their manufacturing process and production.
Though, this decreased demand can be restored to pre-pandemic levels by 2022, as about 100% of the wooden pallets can be recycled, including the nails, which can greatly increase the demand for lumber pallets.
On the other hand, after the second wave, wood prices typically fluctuate more than then most products, because homebuilding can move or down much faster sawmill capacity can. Wood products have other uses that more stable, such as non- residential construction, crates, and pallets, but new housing is largest usage.
IMPACT ON SUPPLY CHAIN
Throughout the history, global chain has been one of the most vulnerable parts of the trading process. The importance of supply chain can be understood by the fact that a number of wars took place in history for the smooth functioning of the supply chain across the globe. These challenges have been intensified by the impeded performance of badly sectors intricately linked to forests and lumber pallets, such as transportation, forest based recreation, and sectors that use wood as raw material, including construction and manufacturing.
Early in 2020, the lumber supply chain contracted for numerous reasons. For instance,
Housing starts declined precipitously, falling 22.3% in March, and the lumber industry anticipated low overall demand. Consequently, lumber mills idled or curtailed production, with the industry analytics firm Forisk estimating an overall reduction of softwood lumber capacity of over 15.6% in the first quarter of 2020 and curtailments continuing into April. However, housing starts rose in June and exceeded starts in 2019 through October. Demand for lumber for remodeling remained steady. As a result, lumber demand exceeded supply, leading to softwood lumber shortages and prices that rose to record high levels in late August and early September 2020.
Thus, the combination of stagnating production reduced demand shortages of raw material, lack of working, capital and forced many operations and enterprises to halt their activities and some permanently.
AFTERMATH OF COVID-19 AND GOVERNMENT INITIATIVE TO BOOST THE GLOBAL LUMBER PALLET MARKET
The rising popularity of lumber pallets has been an instrumental factor in influencing the growth of global lumber pallet market. The market conditions of lumber pallets are severely affected due to the pandemic related challenges and continue to face problems despite recent government measures. To boost the demands, the government has offered export incentives to the industries apart from extending operation hours for the businesses. The government has also imposed import duties on the raw materials that are required for manufacturing lumber pallets.
To conduct proper importation of goods, necessary documentation and customs clearance procedures at importing country have to be completed accurately.
Regulatory framework and government support, such as government grants and funding programs offers investment subsidies and tax benefits which play a key role in driving the global lumber pallet market.
STRAGETIC DECISIONS FOR MANUFACTURERS AFTER COVID-19 TO GAIN COMPETITIVE MARKET SHARE
Although the COVID-19 pandemic continues to transform the growth of various industries, the immediate impact of the outbreak is varied. Despite the severe pandemic situation, the growing adoption of technology is propelling the manufacturers to produce wooden pallets equipped with sensors and Internet of Things (IoT) technologies.
During the pandemic situation, the pallet manufacturers have put in efforts to develop products that more closely resembles natural lumber. The pandemic has also pushed the manufacturers to adopt recycling of the wooden pallets and to transform it into high post recycled product which proves to be more sustainable. Manufacturers are still facing problems with supply chain disruptions and staffing crunches due to social distancing and other restrictions. These problems are overcome by using available materials and skills to redirect.
By increasing reusing activities of lumber pallets, there can be increase in number of pallets which provides flexibility. This can cause demand spikes and can help in determining the pallets which are best fit for their specific warehouses and storage systems.
Hence, the various strategic decisions taken by the government can prove to help increase the market share of lumber pallets. Strict checks of the pallets before distribution can ensure that the pallets are contamination-free and help to discard the damaged and low quality ones.
Pandemic has taken a toll on every aspect of life, including the global economy. With the significant downfalls in many sectors, a collaborative effort of government, industry players, and consumers can win the fight against COVID-19.
It still continues to inflict the world with appalling economic and social dilemmas, capable enough to leave severe backlash on the economy for the next several years. The first wave had already inflicted powerful blows to the population as well as the economy. The currently experiencing second wave is expected to be more disastrous not only to the masses but also to financial markets.
The COVID-19 pandemic has affected the lumber pallet market in a serious manner. One of the restrictions brought by the pandemic was the closure of lumber pallets production. This cession of production will have a severe impact on the country’s GDP as well. Therefore, it is important to take decisions that will economically improve public admiration, and create favorable conditions for the activities of business entities in the lumber industries, and at the same time increase the level of preparedness for a crisis in the future.
Hence, due to appropriate and continuous government support, the manufacturers of lumber pallets are able to overcome the obstacles and increase their production in a fruitful manner.