Summary
• Good spring weather has boosted fencing sales.
• The recession may increase demand for fencing as people “improve, not move”.
• The credit insurance issue is affecting fencing and pallet companies.
• The demise of the Latvian timber industry is benefiting British mills.
Easter marked a positive start to the fencing sector’s peak period and now the industry is keeping a keen eye on this weekend’s Bank holiday weather, hoping that fine days will sustain demand.
One contact told TTJ that the retail sector’s demand for fencing had been strong through March and April and had exceeded forecasted figures by more than 30%.
“We anticipate that demand will continue to be strong throughout the next Bank holiday weekend and early summer and then potentially start to show a reduction,” he said. “Stock levels are tighter than we would normally carry at the moment – one factor being demand has significantly exceeded forecasted levels.”
Across the board it was noted that the recent bright spell had boosted sales. One sawmill said that its Easter stocks of fencing were almost depleted over the holiday weekend.
And now many in the sector are hoping for an Indian summer, which could mean healthy sales continuing into the autumn. “I predict the next 6-12 months being very good for fencing, depending on how long the summer lasts,” said one contact. “Last year September was the end, but this year there could two or three good months after September.”
Impact of recession
The recession is also proving to be an ally for suppliers to the domestic fencing sector, as financial restraints mean more people are spending their holidays at home. “The garden will replace the holiday destination,” said one supplier. “If the weather stays fine we can expect an increase in sales of decking and fencing.”
This “don’t move, improve” trend was cited many times as being a potential coup for the sector.
Tempering this slightly more positive outlook, however, industry sources stressed that it does follow a pretty difficult period from last autumn onward. In fact, one trader described September to March as “the worst trading period in history”.
Other manufacturers said they’d had orders for large projects either cancelled or put on hold indefinitely as people either struggled to find funding, or companies went bust. “It’s been fairly flat, a worrying time of year,” said one. “Many businesses have been just looking to keep their heads above water. The end of the year particularly was looking fairly ticklish.”
Public spending projects
A curent concern is that public spending projects, such as environmental noise barriers for the highways sector which had looked like providing some safe territory for timber, are now being cut back. Several contractors that relied on these large projects and industrial work have folded, while others are on shorter weeks. “It’s dire times; there are no orders coming in,” TTJ was told.
The banks’ general reluctance to lend is also affecting businesses, as is credit insurers’ wariness of the construction supply chain. This means that firms are now at risk even dealing with a long-standing and trusted client which has had its credit limit razed to nil. This is affecting both existing relationships and new business. “Purchasing from new areas has the same problem but inversed,” explained one source. “The whole thing’s coming to stalemate.”
Another contact said insurers were telling fencing contractors to take on work and if they were paid, the insurers would then give the customer a rating.
New suppliers were not allocating any new credit facilities unless the contractors provided up-to-date management accounts. “They’re throttled at the moment,” TTJ was told.
Some hoped the credit top-up scheme announced by chancellor Alistair Darling in the budget could ease some pressure, but others were less convinced. “The guaranteed loans announced in the budget are not enough. Companies are not in a position to take on any debt, guaranteed or otherwise. They have no confidence to know whether they’re going to be able to pay that back.”
Latvian mills
The current difficulties of Latvian sawmills appear to have allowed British mills a chance to steal back fencing clients that once looked abroad for the best deal. A trader noted: “In Latvia, 50% of sawmills were mothballed, and of those, 50% closed permanently. UK sawmills are now acting very aggressively to get their market share, and are setting the market price for imports, a situation that was the other way around two years ago.”
It appears that now everything is against the importer as home-grown deals offer the best value. “It’s still pretty cut-throat out there,” said one. “People are desperate to secure orders – I’ve seen people doing jobs at cost minus 5%.”
