Softwood lumber futures are a headline number. When they fall thirty per cent, people notice, and reasonably enough they expect the price of everything made of wood to follow.
Recycled pallets mostly do not, and the reason is worth understanding because it changes how you should plan your buying.
What actually sets a recycled pallet price
Three inputs, in rough order of weight. First, what we paid for the core — which is set by how many empties are circulating in the region, which is a function of distribution activity rather than lumber. Second, labour: grading, repair and dismantling are hand operations and they are the largest cost line in this yard. Third, freight, which is diesel and miles.
Lumber appears nowhere in that list except indirectly. We buy very little new lumber; the repair bench is fed by the dismantling line, which is the whole point of the operation.
Where the connection does exist
Substitution is the mechanism. When new pallets get cheap enough, buyers at the margin switch, demand for recycled softens, and prices ease. When new pallets get expensive, the reverse happens hard — which is exactly what 2021 looked like from this side of the fence.
But the switching is slow and it is asymmetric. Buyers move to recycled quickly when new gets painful, and move back reluctantly, because having gone through the exercise they usually discover Grade A recycled does the job.
So a falling lumber market pushes recycled prices down eventually and gently. A rising one pulls them up quickly and sharply. It is not a symmetric relationship.
| Input | New pallet | Recycled pallet |
|---|---|---|
| Lumber cost | Dominant, 55–70% of cost | Negligible — repairs use recovered stock |
| Core acquisition | None | Largest single input |
| Labour | Moderate, largely automated | Dominant — grading and repair are manual |
| Freight | Significant | Significant |
| Energy | Kilns and treatment | Grinder and yard equipment |
What actually moves recycled prices
- Distribution activity. More freight moving means more empties reaching yards. A soft quarter for distribution is a tight quarter for cores.
- Seasonality. Spring demand against a fixed core supply, every year.
- Labour cost and availability. This is the input that has risen most consistently over the last five years and it is not going back.
- Diesel. Direct, immediate and visible in delivered pricing.
- Weather. A wet autumn downgrades a lot of outdoor-stored cores and tightens Grade A supply specifically.
What to do with this
Stop using lumber futures as a proxy for your pallet budget. They will mislead you in both directions, and they will make you defer purchases in exactly the quarters when deferring is expensive.
Watch distribution volume in your region instead, and watch the calendar. Those two together explain far more of the variance in what we quote than anything happening in the softwood market.
And if you want price certainty, buy it directly: book volume ahead at a fixed price rather than trying to time a market that is not moving for the reasons you think it is.