A pallet recycling business collects used wooden pallets ("cores"), sorts them by size and condition, sells the good ones as they are, repairs or rebuilds the damaged ones, and dismantles or grinds the rest into parts, mulch, animal bedding or fuel. Profit comes from the spread between the cost of acquiring and handling cores and the value of the graded pallets, parts and wood fiber that leave the yard.
How big is pallet recycling?
Recovery is now a core part of the wooden pallet economy, especially in North America. A 2020 study by Gerber, Horvath, Araman and Gething, published in BioResources with data for 2016, estimated that the US produced about 513 million new wood pallets that year, while about 326 million pallets were recovered and sold as recycled, repaired or remanufactured pallets. Recyclers in the same study reported that roughly two thirds of the cores they received were repaired and resold, about 18% were dismantled for other uses, about 11% were ground or chipped, and only 0.3% went to landfill.
Landfill data point the same way. A Virginia Tech study carried out with the National Wooden Pallet & Container Association (NWPCA) reported a recovery rate of about 95% for wooden pallets and an 86% drop in the number of pallets entering US landfills compared with 1998 data.
In Europe, the open EPAL exchange pool creates a similar trade in used Euro pallets, sorted into defined quality classes and repaired only by licensed repairers.
Sourcing cores
"Cores" are used pallets bought or collected for recycling. Typical sources include:
- Retail distribution centers and supermarkets, which receive many one-way pallets from suppliers.
- Manufacturers with incoming raw materials on pallets they do not reuse.
- Logistics providers and warehouses.
- Waste and recycling sites, including landfill recovery areas.
- Pallet brokers who aggregate small volumes.
Pallets belonging to pooling companies (for example CHEP's blue or LPR's red pallets) are not the recycler's property and must be returned to their owners; good sorting procedures identify and segregate them early.
Collection usually means trailer drops at the source, with the recycler swapping a full trailer for an empty one. Whether the recycler pays for cores, collects them for free or charges a removal fee depends on local supply and demand and on the mix of pallets. Transport cost per trip is often the deciding factor in whether a collection account is profitable.
Sorting and grading
Sorting is the heart of the business: every core must be routed to its most valuable use. Workers inspect each pallet, often on a sorting line or at the trailer, and assign it to a stream.
Common grade concepts
| Stream | Typical meaning | Destination |
|---|---|---|
| Premium / Grade A / #1 | Standard size, sound, few or no repairs, clean | Sold as-is to demanding users |
| Grade B / #2 | Sound but with repairs such as companion stringers or mixed board colors | Sold as-is to price-sensitive users |
| Repairable | Damage limited to a few components | Repair line |
| Odd sizes | Non-standard footprints | Specialist customers, dismantling |
| Pool-owned | Pallets of rental systems | Returned to owner |
| Scrap | Beyond economic repair | Dismantling for parts or grinding |
In North America these grade names are trade conventions rather than formal standards, so buyers and sellers should define them in writing. The Gerber et al. study found that 69% of recovered pallets were the 48 × 40 in size and 91% were stringer pallets, which explains why North American recyclers focus on that format. Grading of used pallets is described in more detail in the used pallet trade.
EPAL quality classes
For EPAL Euro pallets, EPAL defines quality classes for used pallets. Classes A, B and C all allow a maximum residual moisture of 22%, and none guarantees ISPM 15 treatment. Class A pallets are light in color with all markings legible and no adhesions such as film or tape; class B pallets may be darker, with at least one legible marking and slight block misalignment; class C pallets are suitable for storage and transport but not for automated materials handling. Pallets with faults outside these limits may only re-enter the pool after a licensed repair. See EPAL quality classes.
Repair, remanufacture and dismantling
Repair
Repairable pallets go to repair stations, where broken boards and blocks are replaced and cracked stringers are reinforced, typically with companion stringers. The methods and rules are covered in pallet repair.
Dismantling and parts recovery
Scrap pallets are dismantled to recover reusable boards, stringers and blocks. Bandsaw dismantlers cut through the nails between deck boards and stringers or blocks, leaving the nail stubs in the stringers, which are then usually reused. Recovered parts feed the repair line and remanufacturing. Equipment options are described in pallet dismantling machines.
Remanufacture
Remanufactured (or "combo") pallets are built from recovered parts, sometimes mixed with new lumber, often to non-standard sizes requested by local customers. Under ISPM 15, a pallet with more than about one third of its components replaced counts as remanufactured and must be fully re-treated and re-marked before being used in export, with old marks permanently obliterated. See ISPM 15 rules for reused and repaired pallets.
Grinding and wood fiber markets
Wood that cannot be reused is ground. Grinders and shredders reduce pallets to chips, while magnets remove nails and other metal for sale as scrap steel. Typical outlets for the fiber are:
- landscape mulch, often colored;
- animal bedding;
- fuel for biomass boilers, including the recycler's own kilns;
- raw material for particleboard and for compressed chipwood blocks.
Each outlet has quality requirements, for example on contamination, particle size and moisture, and prices vary widely by region and season. Grinding equipment is covered in wood grinders and shredders, and energy use of wood residues in pallet wood waste as biomass.
What drives margins
Margins in pallet recycling are thin and highly local. They are not set by any single price but by the balance of several factors:
- Core acquisition cost, from free or fee-paid removal to paid purchase, depending on local competition.
- Freight, especially empty miles and trailer utilization.
- Core mix: the share of standard sizes and high grades in incoming loads.
- Labor productivity at sorting and repair, the largest operating cost in most yards.
- Parts recovery rate, which reduces the need to buy new lumber.
- New pallet prices, which set the ceiling for what customers will pay for recycled pallets; when lumber prices rise, demand for recycled pallets typically rises too.
- Fiber outlets, since a reliable buyer for mulch or fuel turns a disposal cost into revenue.
- Compliance costs, such as heat treatment for export pallets, fire prevention for stored stacks, and permits for grinding.
A practical way to manage the business is to track, per collection account, the cores received by grade, labor minutes per pallet and freight cost, and to calculate the net value per core. Accounts that consistently deliver low-grade loads over long distances are the first to renegotiate.
Frequently asked questions
What is a pallet core?
A core is a used pallet collected or bought for recycling, before sorting. Its value depends on size, condition and whether it can be resold as-is, repaired or only dismantled.
What happens to pallets that cannot be repaired?
They are dismantled to recover reusable boards and blocks, and the remaining wood is ground into chips for mulch, animal bedding, fuel or panel products. Nails are removed magnetically and sold as scrap metal.
Can recycled pallets be used for export?
Yes, if they meet ISPM 15. Repaired pallets must use treated wood with each new component marked, and remanufactured pallets must be fully re-treated and re-marked.
What share of US pallets ends up in landfill?
Very little: recyclers surveyed for 2016 reported landfilling about 0.3% of the cores they received, and a Virginia Tech study reported a wood pallet recovery rate of about 95%.
Sources
- Investigation of new and recovered wood shipping platforms in the United States (Gerber et al., 2020) — BioResources
- Full paper (PDF) — BioResources
- Study suggests high wooden pallet recycling rate — C&D Recycler
- EPAL quality classification guide (A, B, C) — EPAL
- ISPM 15 (2009 version) — IPPC