The recent period of fine weather seems to have inspired the British public into a seasonal flurry of fencing projects. The majority of suppliers contacted this week spoke of excellent demand and even of seizing the opportunity to raise prices. Only a few companies were disappointed by the size of their order books, while others pointed to a surprising softness in demand for certain products.
Price increases have also been on the agenda in the UK pallet sector, although many manufacturers appear to have found difficulty in passing on higher timber costs to a customer base keen to maintain tight budgetary restraint.
Post-Easter there was a decent uptake of fencing panels and garden buildings in particular. Partly because of difficulties in obtaining timber out of the Baltics, “the industry has not been able to cope with demand”, TTJ was told. The region’s ice prevented UK customers from building stocks in the normal way and, even though ice was no longer an issue and timber exports had begun to flow, the UK fencing sector was still playing ‘catch-up’. That said, it was suggested that vessel bookings out of the Baltic had hit their traditionally lower midsummer levels some weeks ahead of schedule.
Mills in the Baltics and northern Europe have been looking for anything up to 10% more for their timber while the UK’s home-grown sector appears to have achieved increases of between 5-8%. One domestic sawmiller observed: “We all need to stimulate our prices to get more money back down the chain because growers are reluctant to sell.”
Home-grown sawmillers also pointed to the “interesting scenario” developing around residues. Disgruntled over the ever-dwindling price paid by board mills, sawmillers now claim to be obtaining better prices from the biomass sector. The emergence of an alternative market had provided “a light on the horizon” and created some concern within the board sector that “their low residue prices may be at an end”, according to one contact.
The fencing sector has responded to higher timber prices by planning or introducing price increases of their own. A handful of contacts confirmed that they had raised prices by around 8% without any substantial resistance from customers. One commented: “Supply and demand have not been joined up and so producers have benefited. If you can produce it, customers are prepared to pay for it.” Customers were forward ordering for September “to assure themselves of supply”, he added.
Bumper sales
“We have had bumper sales – especially compared to June last year when there was the World Cup and extra bank holidays,” enthused one fencing supplier. He explained that, partly in response to higher currency costs, his company had been forced to take the “almost unheard of” step of raising some of its prices at the start of the season. Close board and Continental fencing products had been increased by 5-6% but standard fence panels had been kept at existing levels “because the market is too sensitive”.
A leading supplier into DIY stores and garden centres anticipated that demand for fencing and garden buildings would remain strong throughout the summer. But he also noted “signs of softness in the decorative products market”, adding that demand for high profit goods such as lattices and pergolas was “a bit lower than anticipated”. His experience was not matched throughout the industry; indeed, one operator claimed that, while waney panels and close board sales had been lower than in 2002, decorative products were continuing to benefit from consumers’ desire to “go more upmarket” with their gardens. This latter view was echoed by another leading supplier who believed the rash of TV garden ‘makeover’ programmes had made the watching public “more discerning”.
Several contacts clearly are not enjoying their summer to the same extent, though.
“We have got short lead times and are about 5% down on where we would expect to be at this time of year,” said one fencing supplier. An 8% timber price hike from his UK mill supplier had been passed on to customers but there was no scope for improving overall margins, he suggested.
“Accredited kilning facilities in the UK are not sitting idle and they simply could not cope with a huge increase in demand. Organisations need to start preparing for this now or face a serious threat to their business come January” |
Alan Moir, business development manager, Scott Timber Group |
Meanwhile, progress was reported this week on noise barriers. Following a complaint to the Highways Agency that it was falling short in enforcing conformity to its own guidelines on Sector Scheme 4 suppliers, the organisation’s chief executive has confirmed that a review is taking place. Under these guidelines, suppliers have to ensure that timber is stress graded and has undergone a higher level of treatment. One company also said that there was already evidence of managing agents implementing closer checks on barrier erection workers.
While a large proportion of the UK timber fencing sector is busy meeting reasonable to strong demand, one contact warned of ground being gained by alternative fencing materials. For example, an Australia-based company was reportedly enjoying market success with metal panel garden fencing, while a recycled plastic wood substitute was gaining in popularity due in part to its low maintenance requirements.
Pallet pricing dilemmas
According to leading pallet manufacturers, sawmillers have been attempting to push up their prices for packaging timbers by as much as 10%. On the other side of the equation, however, pallet buyers have been successful in many instances in resisting increases in their purchasing prices. By contrast, some companies have felt forced to impose price increases of up to 10% – “but this has not been well received,” said one leading industry player. “To get over this short-term situation, it could be putting some long-term business relationships at risk.” Customers could be pushed into the second-hand market or into reducing their specifications simply to remain within their own budgets, he added.
An end to the ice problems in the Baltics has improved supply although there were still suggestions in some quarters this week that export volumes were being adversely affected by log shortages.
Overall, UK pallet demand was described as anything between reasonable and lukewarm. The sector continues to be dogged by familiar problems – most notably, the staunch resistance of customers to price increases and the fact that “too many people are fighting over too small a market”. Not for the first time, contacts blamed overcapacity on the industry’s move towards automated production as a means of reducing labour overheads.
Phytosanitary requirements
Longer term, there is hope that stricter phytosanitary rules might prompt major customers in particular to buy solely higher-value, heat-treated pallets. In fact, several contacts confirmed a big increase in orders and enquiries for them. One said: “The trade seems to feel that, in a couple of years from now, all pallets will be heat-treated – which, of course, will push up costs.”
The UK’s largest pallet manufacturer has warned that this country’s existing accredited kilning facilities might fall short of meeting the demand created by new treatment legislation. Scott Timber Group is to install two new kilns to meet legislation coming into effect in January next year which requires timber packaging destined for the US, Canada and Mexico to be heat or chemical treated.
Business development director Alan Moir said: “Accredited kilning facilities in the UK are not sitting idle and they simply could not cope with a huge increase in demand. Organisations need to start preparing for this now or face a serious threat to their business come January.”