One leading industry figure described demand as “ballistic” before adding: “In my 30 years in the business, I have never seen the like before.” There was currently “a complete mis-match” between supply and demand, he added.
The surge in fencing demand has been widely attributed to the severe winds that swept across the country in mid-January. And with stocks of fencing material already low towards the end of last year, timber availability has proved insufficient to cope with this unexpectedly early start to the fencing season. The tightness of supply has been exacerbated by the lower volumes of material arriving in the UK from traditional supply sources in northern Europe: for example, labour and weather-related log shortages – as well as industry restructuring and a move towards “more upmarket production” – have contributed to a more restricted flow of Latvian exports to the UK.
Taking up the slack
Domestic mills have been attempting to take up the slack but have also been suffering from a shortage of raw material. The UK is also being forced to compete in an increasingly busy global market, with high demand for logs – at equally high prices – coming from as far afield as China and the Middle East.
The scale of the UK fencing order surge has been truly impressive, with one supplier noting that, in the first 11 weeks of this year, one of its major multiple customers had upped its standard panel purchases by 170% compared with the same period in 2006. The initial focus had been on replacing damaged panels but many customers had subsequently looked to bring all their fencing up to the same standard. “Some customers have taken the opportunity to upgrade,” said a spokesperson for the company. “We have seen an upturn in sales of European panels and feather edged.”
Established trend
His comments reflect an established trend in favour of upmarket fencing panels as consumers have looked to invest in their properties – an approach which has also brought sustained upward demand for pergolas, sheds and other garden structures. Theoretically at least, this trend for consumers to buy higher-value products should enable manufacturers to secure wider margins and therefore to pay higher prices for their raw material.
Asked whether fencing demand in April and May was likely to fall below the norm because of the early start to the season, the same source expressed confidence that sales would remain healthy. “The major multiples are still well short of being stocked to the point they would want,” he said. Stock issues were particularly pronounced in the south of the UK, he added.
Given this high-tempo demand and low availability, prices have naturally been rising significantly. Fencing manufacturers have been asked to pay 20-30% more for their timber supplies since the end of last year and, furthermore, there is no guarantee that regular suppliers will have availability. TTJ was told this week that some of the smaller fencing companies had been forced to go to the sheds to source their material because traditional sources had nothing to offer. “Stability of supply is going to be king this year,” said a supplier. Those fencing companies not already featuring on a supply roster were “almost certain to suffer”, he added.
Another contact offered the following summary of the timber supply situation: “If a buyer has not been prepared to pay the price, then there are another 10 that are.”
Indeed, an “insatiable” demand was reported this week for bar material and for large logs for cutting posts. Supply of the timber used to cut slats and battens has been so short that – somewhat unfortunately at a time of high demand – a number of mills have been forced to adopt short-time working patterns. Gwyddelwern sawmill in Wales – which specialises in fencing-related products – claimed a log shortage as its main reason for closing down.
With supply set to remain tight and log prices expected to increase still further, several experts are anticipating further casualties. “I’m sure of it,” said one. “Log prices are going up every week and I can’t see the situation changing in the near term. People are now bidding for and buying logs outside their normal areas. The road miles are cranking up – and that means a further cost.”
Pallet prices
Higher timber costs have also hit the pallet sector, with prices paid by manufacturers said to be 15-20% higher for April than for late 2006. According to several leading manufacturers, it had been possible to pass on the bulk of these increases to end users but some customers were now beginning to resist further hikes.
Concerns about supply are so severe that there has been evidence of “panic buying” by pallet manufacturers – despite the fact that, compared to certain times during last year, recent demand for their products has not been overly brisk. The finite supply of pallet timber in the UK is being “mopped up very quickly”; a significant volume has been diverted into fencing while volumes available from traditional overseas sources – Latvia, for example – have been significantly lower than normal. That said, suppliers in other countries such as Chile and Portugal have been able to take some advantage of the elevated prices now on offer in the UK.
Smooth implementation
The pallet and wider timber packaging industry appears to have seamlessly assimilated the introduction of the UK Wood Packaging Material Marking Programme, which received legal status last November. The smoothness of its implementation has been attributed mainly to the close involvement of the industry in the drafting process.
As yet, inspectors have not been forced to resort to stringent enforcement measures which include seizure and destruction of equipment and/or fines of up to £5,000 for the improper use of the programme mark. Fines of up to £5,000 can also be imposed for impeding inspectors in the course of their duties.
Elsewhere in the world, Japan has earmarked April 1 for the introduction of regulations based on ISPM 15; Brazil has also notified its intention to implement ISPM 15-compliant regulations, for which a comment period is due to end on April 17. Meanwhile, the accession of Bulgaria and Romania to the EU means that wood packaging material dispatched by either country to other member states does not have to comply with ISPM 15. Similarly, compliance is no longer required for wood packaging entering Bulgaria and Romania from fellow EU countries.
Another ISPM 15-related anomaly has been ironed out since the start of this year. South Korea had refused to accept wood packaging fumigated with methyl bromide on the grounds that, it was claimed, this would not necessarily be effective against pinewood nematode. However, South Korea has now reconsidered its position following a change in the specification to extend the treatment time from 16 to 24 hours.
At present, methyl bromide fumigation is one of two available options for producing wood packaging which complies with ISPM 15, the other being heat treatment to a minimum of 56OC at the core for 30 minutes. However, it is understood that another couple of options – microwave treatment and fumigation with sulfuryl fluoride – may well be added in due course as part of the ongoing revision of ISPM 15. The revision is scheduled to be published in 2009.
