Economically, there are several major issues affecting the U.S. economy. First and foremost, the nation has still not fully recovered from the effects of the COVID-19 pandemic, assuming it ever will recover. The pandemic created employment and supply issues in almost every market, including the wooden crate market.
Second, inflation is starting to have a chaotic effect on the economy, something that is going to affect every U.S. resident and business industry. At an annualized rate of over 5.4% (as of October 2021), it's safe to assume most industries will be adversely affected by inflation. And Yes, that includes the wooden crate industry/market.
Finally, the combination of the above two issues, plus unstable lumber prices and supply chain disruption issues are also playing havoc on the wood crate market and other industries.
In the sections below, we plan on addressing the above issues and how they are directly and indirectly affecting the wooden crate market in more depth. We will also identify a couple of trends companies can be looking for in the next couple of years.
COVID-19 and the Wooden Crate Market
As was indicated above, few to no industries have been able to escape the ill effects of the COVID19 pandemic. Yes, that includes the wooden crate manufacturing industry and market. This industry has felt the impact of COVID on several levels.
First, population lockdowns in 2020 in both Canada and the U.S. have had a profound effect on the ability of the wooden crate industry to produce and sell crates. Early on, the lumber industry was shut down, which caused a shortage of lumber. Of course, this didn't become a major issue until 2021 because national and international shipping also came to a halt. As companies started to go back to work last year and continued this year, the demand for wooden crates exploded because eCommerce was and has been creating more need for wood crates than ever before.
Inflation and Supply/Demand and the Wooden Crate Market
At the same time, the wooden crate industry was seeing higher demand, lumber prices busted through the roof. By April of 2021, prices had gone to over $1,500 per thousand board feet. Both increasing inflation and supply/demand issues were largely responsible for driving prices so high.
As one would expect, the high prices were temporary. As supply and demand started balancing out in the summer, prices fell to as low as $390 per thousand board feet by September. As of this report, lumber prices are getting close to the $800 per thousand board feet level.
Going forward, one would assume that the increase in demand and inflation will cause the lumber prices to keep rising with wooden crate prices soon following suit.
What's not likely to happen is wooden crate prices dropping. Why? The demand from industries like auto parts, agricultural produce, construction material/supplies, vehicles, and retail goods like electronics is on the rise throughout the world.
While the U.S. and China are by far the top two consumers of wood crates, shipping needs in countries like India and other parts of East and Southeast Asia are growing fast. This is happening as third-world nations are starting to industrialize. This was happening before the pandemic and only took a hiatus because of the pandemic. As more countries open back up to full capacity in 2022, the wooden crate market should get a significant boost in demand and sales.
Supply Chain Disruption and the Wood Crate Market
If anything is going to draw focus away from inflation and supply/demand issue for the wooden crate market, it's going to be supply chain disruption issues. It's a two-sided issue. If lumber can't reach wooden crate manufacturers, manufacturers can't produce and sell wooden crates. Without wooden crates for shipping, a lot of industries simply can't ship their goods.
While the Biden Administration is dealing with a number of serious national issues, they are having a hard time dealing the supply chain problem. Yes, there is evidence that the COVID pandemic has found another way to impact industries like the wooden crate manufacturing industry. The fact is vaccine mandates are hurting all kinds of industries and businesses. If truckers and dock workers won't get vaccinated and key states won't let them work, "Houston, we have a problem."
It remains to be seen when this logjam is going to be cleared. It looks like the early part of 2022 is the best anyone can hope for. For wooden crate manufacturers and consumers, it might be a wait-and-see situation over the rest of 2021.
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Do Manufacturers Prefer Plywood or OSB
When things start to normalize a little bit, wooden crate manufacturers will need to quickly assess the state of the market. Right now, it is impossible to determine where raw goods will be coming from and what the prices will be. Of course, wooden crate manufacturers will have to adjust the industry's prices accordingly.
Since manufacturers are going to see higher demand while raw material prices are increasing, it's very likely each wooden crate manufacturer is going to have to revisit the choice between using plywood and OSB (Oriented Strand Board). To be clear, each option comes with advantages and disadvantages in terms of crate manufacturing and use. At issue is always going to be cost, durability, and the ability to absorb or deflect moisture. Let's take a look at a few advantages and disadvantages associated with each option.
Pros and Cons of Making Wooden Crates with Plywood
The pros of using different types of plywood to make wooden crates include:
- The edges of plywood hold up better to nailing because of the cross graining inside the plywood
- The cross graining also keeps the plywood from expanding and shrinking in weather conditions
- Plywood does not bend, it's much sturdier than options like OSB
The cons of using plywood to make wooden crates include:
- The use of Phenol formaldehyde and urea in plywood manufacturing could create health issues
- Plywood is not a durable as other solid wood options
- Plywood requires extra maintenance to prevent insect infestation
- Plywood degrades when exposed to lots of moisture
Pros and Cons of Making Wooden Crates with OSB
The pros of using OSB to make wooden crates include:
- OSB materials can be ordered in custom shapes and sizes from the mills
- Smooth surfaces and pre-marked nail spots make for easy use
- Holds up much better than other woods to moist conditions
- Lower costs
- Eco-friendly because the wood composition comes from fast growing trees
- It's faster and easier to assemble wooden crates with OSB
The cons of using OSB to make wooden crates include:
- OSB is manufactured using formaldehyde and adhesives, which create significant health concerns when manufactured and used in large quantities
- More material is needed to make a crate, which tends to make crates heavier
- Not very appealing to the eye
During the material selection process, it is incumbent on each wooden crate manufacturer to decide what features they consider most important based on the wants and needs of their customers.
Trends
The key trend associated with the wooden crate market has to be increasing demand. Of course, that will lead to increased prices, especially with inflation continuing to rise into the foreseeable future.
As indicated above, the drivers of future demand will likely be the increased need for wood crates in third-world Asian countries. Also, the durable goods market is continuing to globalize. That globalization is causing an increase in the demand for the shipping of goods and materials all over the world. That would translate to the U.S. and China increasing their demand over the next few years.
The country that is certain to lead the way in future growth would be India. With a population that rivals China, the country is working feverishly to bring more industries into the country. That's going to create more wealth per capita. When people have more money, they spend it. Better yet, they spend it on big-ticket items and electronics that need to be shipped to local retailers. Clearly, imports and exports from and into India will be significantly higher for years to come.
There is one more trend worthy of mention. As the wooden crate market grows, the industry is sure to see new manufacturers coming in for a piece of the pie. Companies like FoamCraft Packaging Inc, Poole & Sons, C&K Box Company, and Ongna Wood Products are going to see more competition. The real beneficiaries of this competition will be wooden crate consumers that could see prices going down a little as competition heats up.
There are a lot of unknowns at this time. The best anyone can hope for is to buy time until some of the most important issues reach a resolution. At that point, the future of the wooden crate market should become clearer.
