The rising price of timber across Europe is increasing the cost of pallets and leading to pallet shortages, says pooled pallet service provider Chep.

In a media release promoting Chep's pooled pallet service, Chep said higher timber prices had also led to cost increases for the alternative white pallet exchange.

The statement said Chep was largely insulated from the timber price rises. The pooled pallet service provider had more than 120 million pallets in its European pool that were recyled and reused "almost indefinitely".

Chep pallets are painted blue and regularly returned to service centres for maintenance.

Chep Europe marketing director Robert Hutchison said companies participating in the "white" pallet pool used unpainted pallets.

Companies "buy pallets to ship goods and receive empty pallets in exchange. As a pool member, they are responsible for repairing damaged pallets", he said.

Timber prices increased substantially in the past year because of growing demand from China, Russia and the Baltic states. Poor weather conditions in Austria and Germany also impacted negatively on the harvest.

The European federation representing national associations in the pallet and packaging industry, FEFPEB, said in a December media release that there had been "significant upward pressure on timber supplies to the European pallet and packaging industry" since June. "The supply situation has not improved, on the contrary, it has deteriorated in some European regions."

Chep cited the German Timber Price Index from Bloomberg showing timber prices in Germany increased about 500 per cent from July 2005 to July 2006.