Recent events have underlined the vice-like pressure being applied to the UK pallet sector.

Long-established manufacturer WH Shaw & Son of Saddleworth entered administration in October after suffering cash flow difficulties, while the country’s largest pallet producer – Rosyth-based Scott Timber Group (STG) – has closed its plants at Widnes and Northfleet. And the Timber Packaging and Pallet Confederation (TIMCON) has responded to these developments by warning that the pressure imposed by rising timber and energy costs would probably lead to further consolidation in the UK pallet manufacturing sector.

The main factor in the current plight of UK pallet manufacturers undoubtedly surrounds raw material procurement – not only as regards cost but also availability. Supply out of northern Europe has become more restricted, even ahead of the threat of freezing winter conditions preventing or delaying shipments from some ports in the region. Healthier demand within northern Europe itself, as well as from other parts of the Continent, has ensured strong competition fielding particularly high levels of demand and yet some are known to be turning down enquiries “because they can’t physically get the wood”, TTJ was told. “The cheap wood just isn’t out there any more.”

Tight timber supply

STG’s managing director John Scott has already been quoted in TTJ as suggesting that the combined pressure of timber shortages and historically high prices was unlikely to abate before the middle of 2007 at the earliest. And these fears were echoed throughout the trade this week, with one sawn timber supplier commenting: “I’m concerned that pallet manufacturers are offering unsustainable figures for supplies when it’s not clear whether they can pass on the increases to the end customer.” His concerns run so deep that he has elected to turn down a significant amount of business.

According to another UK-based supplier to the pallet manufacturing sector, his company is looking to implement sawn timber price increases of around 9% for the first quarter of next year. Noting that this would effectively mean a jump of 25-30% in the space of a year, he was quick to point out that prices had started to recover only towards the middle of 2006 and that the average price for this year as a whole was likely to be broadly in line with that of 2005.

Further up the chain, UK growers are complaining that they have yet to feel any major benefit from these price increases – although there was an acknowledgement this week of early signs of an improvement in the prices paid for pallet logs.

ISPM marking rules

The UK Wood Packaging Material Marking Programme received legal status in early November. The new law specifies two options for producing material that complies with the ISPM 15 phytosanitary standard for wood packaging: heat treatment to a minimum of 56OC at the core for 30 minutes; or methyl bromide fumigation. In addition, manufacturers are obliged to ensure that they can demonstrate the integrity of their wood packaging material supply chain from the sourcing of ISPM 15-compliant wood to the production

and marking of the finished product. A number of offences and penalties have also been introduced for unauthorised or improper use of an ISPM 15 mark, including seizure and destruction of equipment.

Better news for timber pallet manufacturers is that the Health and Safety Laboratory in Buxton has conducted tests to determine whether the use of plastic rather than timber pallets increased fire risk. It found that fire spread upwards from an ignited plastic pallet to another in around 18 minutes, compared to nearer 50 minutes for timber. The latter required “a far more energetic ignition source”, it was noted. Flames involving timber pallets were almost entirely confined to the height of the stack and were seldom over a metre high. Those from plastic exceeded the stack height and reached 6-7m.

Positive fencing market

Overall conditions for UK fencing manufacturers have been more positive. After having experienced a slow start to the year and generally lacklustre Easter sales, fencing producers saw decent demand persist into the fourth quarter, a phenomenon attributed at least in part to good late summer and autumn weather. The majority of fencing companies appear to have been very busy during recent months although a few are said to have struggled with the impact of “over-trading”.

Unusually encouraging order levels for the time of year have been reported from the domestic sector – where there is a continuing shift from traditional to higher-value products – and also from trade customers. The Highways Agency is said to have been placing decent business for both post and rail, and acoustic fencing, while continuing healthy sales into the DIY sheds are attributed in part to growth in the practice of buying over the internet. While the run-up to Christmas is expected to put a brake on fencing order levels “because people don’t want the stock”, several contacts were confidently predicting a quick return to brisk trading conditions during the first quarter of 2007.

According to a leading fencing supplier, major retailers have accepted price increases of between 4.5-7% to take effect from January, while leading garden centres are also understood to be countenancing higher prices. Such increases are vital, he explained, to offset not only major increases in timber costs but also a more than 20% leap in fuel bills over the past 12 months.

The UK fencing sector has also been affected by the more restricted supply of timber out of northern Europe, with a number of home sawmillers reporting strong demand and extended delivery times. One noted: “We have had a lot of enquiries from old customers looking to place orders with us because they haven’t received what they had been expecting from the Baltics.” While UK mills have come up with some additional volumes, buyers have also been forced to look further afield to make up for the shortfall from northern Europe.

Domestic sawn timber

Prices for sawn fencing timber of domestic origin have made good gains over recent months, with one leading sawmiller estimating the average increase at £10-12/m3 since the latter part of the third quarter. Another contact said that prices had risen on the back of increases for carcassing material and that, of late, fencing manufacturers had been asked to pay an additional 5-10% for their supplies.

Describing the raw material supply situation as “dire”, fencing manufacturers have been struggling to pass on these higher costs to their customers. One commented: “We have already been asked for 10% increases and have been warned of similar increases at the start of next year. We will be looking to raise our prices by around 11% in December but we expect 2007 to be an uncertain year.”

News-wise, the British Standards Institution (BSI) has revised all parts of BS 1722 which relates to fencing. The aim is to establish minimum requirements for materials and workmanship so as to ensure satisfactory service for the purchaser and to assist manufacturers and installers by eliminating unnecessary minor variations in buyers’ demands.

Products covered by the newly-revised standards include close-boarded and wooden palisade fences, wooden post and rail fences, and prefabricated wood and panel fences. According to a fencing industry spokesperson, health and safety and installer qualifications have been built into the new standards. “There is a lot more clarity,” TTJ was told. “The new standards are less prescriptive and more performance based.”

Copies of the standards can be purchased direct from the BSI or at a discounted rate from the relevant trade associations.