While pallet manufacturers as a whole are struggling to pass on higher costs in their final product prices, the contrasting fortunes of UK firms involved in the fencing market have rarely been more stark. Many report very good demand across the board while others claim year-on-year sales have fallen by up to 50% in extreme cases.

A senior spokesperson for one of the firms in the former category said demand for fencing timber had rapidly gathered momentum towards the end of the first quarter, to the extent that his company has been able to feed through, and gain acceptance for, price increases. Particularly strong sales of heavier-duty fencing products indicated that consumers were looking to “step up from standard boards to something that will last longer and offer more security”, he added.

Acknowledging that some other firms were experiencing tougher times, the same source went on to suggest that fencing suppliers who have gone down the added-value route are perhaps significantly better placed at present. “If you cut a narrow range of stock items, you may have problems,” he said. “But for sawmills, there are fencing markets out there.”

Another supplier into the fencing sector said that, during the second quarter, his company had been busier than anticipated given the fact that many of the leading DIY chains had been reporting a fall in sales. Noting that fencing timber prices had increased at the start of the year and were “holding up well”, he pointed to healthy sales into the general merchant fencing sector and to “reasonably buoyant” demand from the agricultural sector.

The suggestion that standard fencing products are attracting less demand at present also found favour with a leading supplier of fencing and other garden products into the multiple retailer sector. While sales of general fencing panels had declined in the second quarter, a company spokesperson said demand for decorative alternatives was moving in the opposite direction. “People are upgrading, migrating up the product chain,” he said. Also pointing to healthy sales of overlap sheds, he added: “People are still spending money on their properties but are being more reserved about it.”

Several other contacts said that their companies had experienced strong sales of garden buildings and decorative screens. In the case of the former, the increase in demand was attributed to a desire to step up from the traditional shed and make better use of garden buildings, for example, for entertaining.

Of those fencing companies reporting less favourable sales, several said that a lack of positive economic momentum was making consumers more reluctant to part with their money. Some hoped that a definitive turn in the weather would kick-start a rather sluggish sales season to date, while several reported that they had declined to pass on all – or even part – of their higher costs to customers for fear of disturbing an already delicate market situation.

Margins tighten

Margins have come under greater scrutiny given the reluctance of many customers to accept price increases at a time when their suppliers have been hit by increases in, most notably, the costs of electricity and timber treatment, as well as by the financial and logistical impact of the EU‘s Working Time Directive. A quick survey revealed that, for many firms, electricity cost increases have exceeded 20% this year.

With demand now appearing to exceed supply, rising round timber prices are likely to keep up the pressure on margins. One round timber supplier reported that his company had been delivering “at massive speed” to many of the leading UK fencing manufacturers, to the extent that “we are struggling some weeks to get enough material to them”. But he added: “Some customers may be looking to stock up in anticipation of a sales boom because it hasn’t happened yet.”

In terms of supply, several UK mills reported an upturn in demand from customers who had previously sourced their raw material requirements from Latvia but who had encountered difficulty in satisfying their needs from this source. According to one contact, there was no great problem with log supply in Latvia but, over recent weeks, shipment of sawn goods had been held up by the late freeze affecting the Bay of Riga.

&#8220If you cut a narrow range of stock items, you may have problems. But for sawmills, there are fencing markets out there”

The huge windblow which devastated large parts of northern Europe in January appears to have had little direct effect on the UK, although the tree cutting infrastructure has been affected by the fact that harvesters have been lured to southern Sweden by attractive financial packages to assist with clear-up operations. It is understood that mills in the region have put on extra shifts or restarted idle capacity to take advantage of the additional supply.

Updated standard

On the wider news front, it was confirmed this week that public consultation on the overhaul of the BS 1722 fencing standards is likely to take place in the late summer. The review began in October last year and covers all types of fencing. Meanwhile, the Environmental Noise Barrier Association, now incorporated into the Fencing Contractors Association, is linking up with the Highways Agency and the relevant British Standards committee in a bid to come up with standards for monitoring and testing moisture content in timber noise barriers.

Also on the subject of the Highways Agency, recent weeks have brought a high-level renewal of the government’s commitment to Sector Schemes in response to pressure from industry. Fencing suppliers who have invested in meeting scheme compliance criteria have been complaining for some time that some work is still being undertaken by non-compliant companies. However, the government has now reiterated its commitment to applying Sector Scheme criteria “and the right questions are starting to be asked pre-contract”, TTJ was told this week.

The palletwood market has been reasonably strong and prices have maintained the positive direction assumed several months ago, with the benefits filtering down to sawmillers and growers alike. Pallet manufacturers, however, have been struggling to pass on these raw material increases to their own customers, many of whom are finding economic conditions less than favourable at present. Producers are also having to grapple with the cost pressures applied by fuel increases and by the EU Working Time Directive.

Rising costs

Unfortunately for pallet manufacturers, timber prices have risen on the back of supply issues rather than demand for their products. Supply of Baltic timber, for example, has been hit by rising log prices, higher shipping and fuel costs, a lack of available shipping capacity, and the availability of more attractive markets in countries other than the UK. A leading UK pallet manufacturer confirmed that demand was remaining “steady” across the board despite a somewhat “patchy” April.

As reported recently, increases in palletwood prices, shortage of supply from the Baltics and good demand for fencing material had narrowed the gap between the price of UK red (pallet and fencing) and green (carcassing) logs. Against this backdrop, pallet and fencing manufacturers looked to compete with carcassing mills for green logs, which are generally straighter, less knotty and give a better yield. However, it is now understood that carcassing mills have “revisited their pricing policies”.

In other pallet news, latest figures from the European Pallet Association show a significant upward trend in flat pallet production during the first quarter of 2005, with the totals for each of the first three months showing a marked increase over the corresponding figures for 2004. Overall, flat pallet output climbed above 10.2 million units in January-March 2005 from 9.2 million in the first three months of 2004 – an increase of around 11%.

Meanwhile, the timber packaging sector in general is continuing to monitor latest developments surrounding the ISPM 15 phytosanitary standard. Indeed, it was reported this week that an increasing number of manufacturers are looking to move to 100% heat treatment because of the logistical difficulties involved in the separate storage of treated and non-treated material.