As we head into 2019, companies serving the timber fencing sector will be reflecting on a less than stellar year in terms of demand.
Rising wood raw material prices were the headline news, along with some initial supply difficulties and a lack of a major storm to promote demand. But there were bright spots, such as the fencing contractor sector serving the housebuilding market, which has remained busy.
Like most other companies in the timber supply chain, the market in the first half of 2019 is a very difficult one to predict because of wider geo-political issues around Brexit and what the knock-on effect to consumer confidence may be.
One thing’s for sure – if there is a major storm with very high winds, it’s likely to drive fencing replacement demand. And fencing sector manufacturers know that the UK is certainly due a big winter storm after nothing of major note for around four years now.
Timber cost inflation
A major fencing manufacturer told TTJ that his round timber costs had grown 35-40% during 2018.
“We’ve tried to keep pace with that in terms of passing on price rises,” he said.
“Some competitors had been trying to hold their own prices but are now having to make bigger prices increases as a result.”
There has been talk of some smaller and medium sized manufacturers having to place bigger increases after holding off due to being on fixed price supply deals.
“Looking ahead we do hope prices calm down so we can get a bit of stability,” the contact added.
The key Easter period, always a bellwether for the fencing sector, will come just after the UK’s planned exit from the EU.
A poor exit or a continuation of the current stalemate has the potential to knock consumer confidence, though it’s reasonable to assume homeowners would still be more likely to invest a few hundred pound in their gardens than build an extension or go on an expensive foreign holiday.
Another fencing supplier summed up the situation:
“In 2019 I really do not know what is going to happen,” he said.
“But I think prices will remain static in the first few months, with maybe some increases in March.”
DIY market challenge
From a DIY retailer perspective, it has been a difficult time in terms of consumer fencing demand.
B&Q’s Q3 sales were down 2.8%, while Travis Perkins’ (TP) consumer division showed a 4.2% reverse in the same period.
And Homebase had the additional challenge of uncertainty, ownership change and store closures, with investment firm Hilco Capital now its owner.
An update from Wickes owner TP in December, 2018 cited market conditions to remain uncertain in the shorter term, impacting secondary housing market transactions and consumer confidence.
The “challenging” UK DIY market negatively impacted sales and profitability in Wickes, with significant cost reduction plans under way, it said.
Fencing manufacturers talking to TTJ cited a reduction in core timber fencing panel sales by around 2-4%.
One manufacturer said, factoring the timber cost increase in to the equation, the real reverse was nearer 7%.
“But the decorative imported lines continue to be strong,” he said. “There is more stability on pricing in the European products because exchange rates have been more stable.”
He said Brexit wouldn’t put off companies exporting fencing products to the UK.
“They still need to do it, we are a massive market and they will find a way, whether it costs a bit more or otherwise.”
The company revealed that it was adding extra warehousing, but more for operational reasons than any Brexit-related factors or predictions on 2019 demand.
Other points cited include a trend of more people trading up to more expensive panels over traditional lap panels, a continued increase in online business and more supplying via buying groups.
But the winter weather remains probably the single largest factor that could influence demand this year.
With the last major storm happening in 2014, a really big storm could have a major impact, fuelling replacement work. And it could also help take the edge off a potential negative effect from Brexit.
