The one real cautionary note from the fencing sector is that smaller businesses risk overtrading as they aim to cash in on burgeoning market upturn.

"We’ve been in recession for so long it’s tempting to grab everything we can to make up for lost time," said a supplier.

Apart from that, however, the sector seems reasonably pleased with its lot. Not all shouting recovery from the rooftops, but expressing general confidence about prospects.

"Quite a bit of business has emerged from the housing market and there are industrial units with timber hoarding around them going up and a little more has been released on the roads – the post and rail noise barriers," said an industry spokesperson.

Another supplier was less effusive, but still acknowledged improvement. "It’s not great but it’s better than it has been for some time and, generally speaking, there’s a feel good factor."

Perspectives on the market are distorted to a degree by the fact that last year was so good for the sector, thanks to the post-storm demand surge. But an upturn is still clearly in focus said a major producer.

"We put more than half a million more fence panels into the market in 2014 and we haven’t hit those heights this year. But we’ve actually done well and are 15-20% above where we expected to be at this point – which, cumulatively, is only about 10% lower than last year’s volume."

Demand is coming from both the merchant and DIY/retail networks, with the latter in particular promoting fencing heavily. Standard fencing products such as lap panels are still providing the bread and butter business, particularly through DIY, although there are different grades within these lines and customers are reported trading up. Featheredge, which sees more sales through merchants, is also having "a decent year".

"Last year supply of the more value added product was constrained as the focus was very much on getting the lap panels out, so featheredge demand may have been suppressed until 2015," said a manufacturer.

Time to trade up

Either way, the company had done well on lap panels this year and "even better" than its forecast for its value added products.

"Budget products have held up well but premium decorative panels and decorative structures are now seeing strong demand," agreed another manufacturer.

Fencing producers with flat production profiles and extensive stocks are able to operate with very short lead times and, for some at least, forward ordering has become less crucial. But manufacturers say they are now are starting to put plans in place to build stock leading up to the end of the year, although they report that their customers "aren’t really there yet". Fencing material suppliers also weren’t overwhelmed with forward orders early in the year. This, they said, was due to manufacturers building up high timber volumes at the end of 2014 in the expectation of more storms, which didn’t happen. This led to a level of overstock until after Easter.

As a result, said a sawmiller, "as the stocks have been worked through, customers have been ordering on a monthly basis rather than for a quarter. It wasn’t until the end of July that they started to look at the September/ October period".

But he stressed that his company’s own stocks were "comfortable". "We’re definitely not overstocked as timber is still going out the door – and featheredge pales have done very well this year – but we’ve got reasonable stocks of our commodity items," he said.

Pricing has proved to be "one of the most difficult areas" of business.

"To enable us to produce storm level stock for late 2014 and early 2015 the supply chain didn’t slow down and the prices stayed high until they started to ease later in the season." Selling prices are now said to be stable but costs are an issue.

"Prices [for sawn timber] came down substantially over the May-July period, probably by 10-15%," said a sawmiller. However, the cost of round timber, while it’s softened, hasn’t matched this, so primary processors are having to absorb much of this discrepancy and accept being squeezed on both margin and profit.

Further down the supply chain, the fencing manufacturers are fielding price-cut requests from customers.

They see the price of sawn timber falling – largely as a reaction to an influx of imported carcassing driven by the strength of the pound versus the euro, and want that passed on.

Pressure on prices

"Merchants tell us timber has come down by 15%," said a manufacturer. "But while sawn timber, like carcassing, has, round timber hasn’t.

Fencing components are from the same core material, but it’s a different market and there’s a minimal number of us cutting these fencing components, so there isn’t a capacity surplus."

"The easing of timber prices for fencing components came too late to impact the bottom line with reducing demand," added another manufacturer.

There’s also debate over the incised fence post price premium. A spate of highly publicised failed treatments and early fence post failures has left many contractors feeling they have no option but to use incised fence posts "They’re suddenly the best thing since sliced bread," said an industry spokesperson. However, he added, incising comes at a price.

"Anecdotally we hear that certain pockets of customers have moved or are moving to incised posts and we’re trying to gauge the cost premium and if people are prepared to pay it," said a manufacturer.

"We’re getting mixed feedback. Some will make it a standard and others say it’s not worth the money – particularly in the domestic market."

The interim solution, he said, seemed to be to hold stocks of both incised and un-incised posts and see which proved more popular.

Positive prospects

The industry mood now looks like staying positive through this year and beyond.

"Sales have been consistently strong and above where we’d expect," said a manufacturer. "It’s tailing off now, but I’m optimistic for the rest of 2015 and into next year."

And there seems to be continued optimism through the trade and into housebuilding and construction. Our merchant customers are quite positive."

Pallets pick up pace slowly

Like fencing producers, pallet makers say rising imports have put pressure on them to cut prices.

"There’s [import] competition out there, particularly with the weaker sawn timber prices caused by the wider economic downturn and influx of material from Sweden," said a pallet producer. "That’s filtered down to some of the customer base, although for those on longer term contracts we’ve probably averaged it out over a period. But prices are pretty low at the moment."

Another manufacturer also cited the exchange rate as a problem for the sector.

"It’s not such an issue with construction pallets, but with the more standard products there’s always a risk that a strong pound versus Euro will bring [imports] flooding in," he said.

"In fact I understand that they’re already rising, particularly white Euro pallets into the south of England."

Demand for pallets has also increased across most sectors, but suppliers say the upturn is in line with the general industry pick-up and "not massive".

"Construction type projects were a bit late so they were more subdued than we would have expected them to be in the second and third quarter, although they are coming on now," said a manufacturer.

Another producer was more cautious still.

"As far as new pallets go, it’s the same story as a year or so," he said.

"Customers want to minimise costs, so if they can get repaired or second-hand pallets, or de-spec them to make them cheaper, they will.

"Even the pallet pools are reluctant to buy new and are doing everything to keep costs down."

The level of forward ordering is very variable with some customers ordering three months ahead and others "leaving it to the last minute".

But one manufacturer said that, while getting the order in the first place was obviously crucial, getting customers to call them off was equally important.

"The call-off situation is worse and customers go to great lengths not to do it," he said. "But we have to apply pressure as, our stocks can deteriorate".

While acknowledging challenges, looking ahead the pallet sector is hoping for steady growth in demand.

"Generally it’s ok," said one manufacturer. "Although it’s not at a ridiculous pace, we are heading in the right direction."

Another issue on the horizon, however, is possible extension of phytosanitary measure ISPM 15 to cover intra as well as extra EU pallet movement.

TIMCON and FEFPEB are monitoring the situation.