The Russian invasion of Ukraine proved disastrous for the thousands of Ukrainians who lost their lives and the millions who lost their homes, but the consequences of the war are felt far beyond the borders of the country and are shaking the European economy.
The war in Ukraine has already sent painful shocks to the global energy market, with gas prices reaching prohibitive levels. Now, experts say the dispute is also disrupting supply for the humble, seemingly ubiquitous wooden pallet.
The European Pallet Association (EPAL) and the European Federation of Wooden Pallet and Packaging Manufacturers (FEFPEB) have both warned that wooden pallets – essential handling and storage products used to transport goods and shipping them to warehouses or supermarkets – may soon become harder to find. in Europe because of the war in Ukraine.
Because Europe, in normal times, massively imports its wooden pallets and the materials to manufacture them from three countries: Ukraine, Russia and Belarus. The war in Ukraine, combined with retaliatory Western sanctions against Russia and its ally Belarus, has effectively eliminated this entire source of supply.
The result, for companies further downstream, is a sudden increase in pallet prices and the risk of running out of an often overlooked but essential product to supply chains, as it allows companies to stack goods and transport efficiently with reduced loading time. .
“There’s a phrase: ‘Pallets move the world,’ and it’s true,” Marshall White, a professor emeritus at Virginia Tech and a top wooden pallet expert, told Euronews Next.
“Without pallets, our supply chains would come to a halt, shipping one box at a time, just as we did before World War I when the pallet started to enter supply chains,” he said. he declares.
“Pallets move the world, they are the critical interface between everything that moves the product, all the equipment, shipping, trucks, forklifts and the product itself. It makes the supply chain work “.
When Russia invaded Ukraine on February 24, the country’s sawmills and pallet factories ceased to function, as factory workers fled the war or were conscripted into the military. The wood, intended for packaging and pallets, was also not exported to Europe.
According to Michael Modugno, co-founder and vice-president of PGS, a company that sells and rents wooden pallets across the continent, around a quarter of the wood used by the European pallet industry normally comes from Ukraine, Belarus and Russia – and its absence is clearly felt throughout the supply chain.
“Today more than 25% of wood is missing from factories,” Modugno told Euronews Next.
The countries that will suffer the most from the supply shortage are those most dependent on such imports, he said, citing Germany, Italy and the Netherlands.
Last year, according to the FEFPEB, Europe imported more than 2.7 million cubic meters of sawn softwood, much of which was used to make wooden pallets and packaging produced in European markets. Ukraine also produced and exported about 15 million pallets, most of which were sent to Europe.
“Some 20 million pallets were exported from Russia, Belarus and Ukraine to Europe. So now, in addition to missing wood (from the market), we also have missing pallets,” Modugno said.
“We are also short of nails, as most of the nail producers in Poland and Eastern Europe were buying the steel from Russia,” he added.
The German pallet industry federation HPE said this week that its manufacturers were facing an “acute” shortage of nails. This is not a detail in the industry: 70 to 80 nails are needed to make a single pallet.
Historically, the pallet market has been fairly stable. But supply chain problems caused first by the COVID-19 pandemic and now by the war in Ukraine have led to unprecedented price increases. industry HPE Price Index of sawnwood and wood-based products for pallets has exploded in the past two years.
Before COVID-19, a cubic meter of wood cost around €150. In March, it exceeded €450. The standard European pallet, known as Euro pallet or EPAL pallet, now costs around €23, compared to €9 at the end of 2020.
As Europe’s economy rebounds from months of pandemic-induced shutdowns, demand for pallets is very strong, Modugno said, but the shortage of truck drivers, limited wood supplies and soaring costs of energy make it difficult to meet this demand.
Modugno said it was impossible to predict all the indirect effects of the war on the wooden pallet market, but if there was a shortage in Europe, the sector should prioritize strategic sectors such as industries. pharmaceutical and food. Other less critical sectors could potentially suffer a setback.
He added, however, that it was unlikely to reach that point if companies offered solutions such as recovering and reusing pallets.
Shortages of pallets on the front line in Ukraine?
Modern pallets, designed for forklifts, have played a key role in logistics over the past century. Their use really took off with World War II, when the US military used them to efficiently transport weapons and ammunition as quickly as possible.
Fast forward to 2022, and pallets could also play a quiet but key role in the heart of the war in Ukraine.
Some experts have claimed the invasion of Russia could have been hampered by a shortage of pallets which forced Russian troops to carry boxes of mortars and ammunition by hand, footage from Ukraine showed.
Twitter user Trent Telenko, who in his biography says he is a retired US Department of Defense official, posted a detailed thread in March pointing out the lack of pallets in photos of Russian troops in First line.
Prof White, who has worked in support of the Department of the Army and the Department of the Navy in the United States to help them improve their supply chain efficiency, said Russia was likely running out of many pallets imported wood.
“Looking at the numbers, I suspect Russia is importing a lot of pallets, and if so, with sanctions in place both ways, it could have a significant impact on the availability of pallets for the Russian military,” he said. he declared.
Lack of pallets is not a desirable situation for a modern economy or a modern army.
“If you want to have an efficient supply chain, commercial or military, you keep your products on pallets as far down the supply chain as possible because as soon as you have to take them off the pallet, your efficiency goes down,” White mentioned.
“And all of that seems to play into the issues that we seem to be seeing with the Russians moving equipment, clothing, food and ammunition onto the battlefield.”
“Dwight D. Eisenhower said supply chains win wars. And he’s right. He’s absolutely right about that, and military experts know that,” he said.