Summary
• Fencing retailers are more prepared for spring demand this year.
• The panel and biomass sectors are providing competition for raw material.
• There is concern over newer treatment methods following the ban on CCA.
What a difference a year makes. A year ago when the economy was in freefall, very few fencing retailers were putting much product on the ground. Then the unexpected bounce in demand in April caught many out.
An economic improvement combined, with fresh memories of being caught out, has made them more prepared, with a fair bit of cautious forward ordering in evidence.
More optimism
One large manufacturer told TTJ that this had caused demand to be pulled forward, which should, in theory, mean less pressure on the manufacturers to supply product when spring demand kicks in.
“People are being a little bit more optimistic and they want the stock delivered in good time,” the contact said. “The snow created a few difficulties in the first 10 days of the year, with some deliveries suspended. But we’ve been flat out since then.”
The company reported year-to-date order volumes 40% higher than a year ago.
However, not many are expecting a bumper year for fencing, with a slight improvement being the consensus for 2010.
Unpredictable factors such as the all-important weather and the likelihood of tax increases following the general election could serve as a brake on business.
“Demand has been low so we have not been too pushed,” said another manufacturer. “But my feeling is when it takes off we will be chasing our own tails.
“The tail end of 2009 was pretty strong and I expected it to continue into January but I think the snow killed it. A lot of customers say they don’t even have a week’s work ahead of them.”
He feared selling prices rising too much, flagging up that 2010 was a different economic landscape from 2007, when prices also rose strongly. Now customers aren’t prepared to pay over the top for their fencing.
Home-grown timber
But the producer has bought a lot of home-grown timber stock, betting that demand and prices will increase and also because of talk of shortages.
“We are taking a bit of a gamble, we could be left with a lot of stock,” he said.
Raw material purchasing is competitive, with the panel sector reportedly willing to pay higher prices for standing timber, probably because they can export their products while the euro is so high.
“Supply is a pretty sensitive area at the moment,” said a sawmilling contact. He said biomass sector demand was starting to increase, further pressurising smaller log supply.
Raw material prices
Raw material prices are estimated to be up 30-40% on a year ago, with fencing manufacturers putting their purchasing costs at 10-15% higher in the past few months.
Many are electing not to enter bidding for standing timber, believing the escalating prices are unsustainable.
One has held selling prices and absorbed the extra cost but will look to raise prices at the end of February. The other has already passed on some of the costs and said further increases were “highly likely”.
Concern over newer treatment methods following the ban on CCA, is still bubbling up, with many contacts citing stories of failing fence posts within three to four years, including some large installations.
There is concern that it may be the tip of the iceberg and that incidents will increase, potentially leading to some tricky questions to answer further down the line on product guarantees, which typically run for 10-15 years.
