There has been some concern within the pallet industry about the increased price of nails and what it means for the future of pallets. So we thought we’d examine the problem. What is this business with nails, and why is it important?
First of all, pallets are not manufactured in a vacuum. Pallet construction is fairly straightforward; steel nails only account for 5 percent of the raw material cost of making a pallet, but if the price of nails increases, producing pallets gets more expensive. The same holds for wood, labor, fuel, and a number of other costs.
Eight years ago, on May 29, 2007, five U.S. nail manufacturers, including Mid Continent Nail Corporation, filed a petition with the International Trade Administration asking them to do something about the influx of cheap nails flooding the U.S. market from China and the United Arab Emirates. Domestic nail producers were unable to sell their own products because they couldn’t compete with the much lower priced foreign nails. It’s the responsibility of the International Trade Association (ITA) to make sure occurrences like this can’t happen and the playing field is kept level for all.
As a result, on January 23, 2008, the ITA placed tariffs on nails coming in from both China and UAE, and nail prices jumped. Now, long time pallet makers have seen the price of nails fluctuate to as high as $40 for a box of nails, but an increase from, for example, $21 a box to $31 a box is concerning for any company in the hardwood products industry.
However, it’s also important to remember that the ITA and fair trade rules exist to protect American industry. Many, many Americans experienced job loss and a resulting decreased standard of living after the passage of NAFTA in December, 1993. Manufacturing in America was permanently and irrevocably affected. Without a strong manufacturing sector, all Americans are worse off.
Ultimately, what will result from these ITA rulings should be a more stable nail price as nail dumping ceases and both domestic and foreign nail producers are forced to price their nails competitively with each other.
The pallet industry has experienced interesting times in the last few years, and manufacturers like Kamps have had to work hard to continue to offer their customers a quality product at a competitive price. It’s a challenge. But we’re committed to both our customers and American manufacturing as a whole, and we believe now is not the time to panic over the price of nails or any other factor.