In a sign of frenetic fencing times, with buoyant demand and restricted raw material availability, one manufacturer has taken radical steps to keep servicing existing customers.
At the start of 2021, it adopted a trade sales only policy. Next, with timber supply tightening further, it stopped taking on new custom altogether. Now it’s taking its first ever summer break to manage stock levels.
“In pandemic lockdown two we decided to stay open, but banned domestic customers,” said the company’s managing director. “We could see where things were going with demand and timber supply and we did not want to become a tourist attraction for a day out and a wander about.”
The block on new customers came in April after an unprecedented surge.
“Between January and April we’d entered a further 400 customers on to our system – a 33% increase,” said the producer.
“Having continued at a reasonable level throughout lockdown, the fencing market is now limited only by supply of materials and skilled labour,” said Association of Fencing Industries (AFI) chief executive Ian Ripley. “Producers have simply been going flat out to meet demand.”
One major fencing contractor reports barely any business interruption from the start of the pandemic.
“The fencing market for us went into overdrive from the moment we re-opened on a pre-order, no collection basis on March 30, 2020,” said its director.
The AFI points out that the UK fencing market “is not driven by consumers alone” and that industrial and government demand are also key. But what one fencing supplier described as the recent “market feeding frenzy” is in large part attributed by producers to the explosion in home and garden improvement activity. This, they say, is the result of consumers having surplus cash from their drop in leisure spend in the pandemic, and from increased home working.
“We’re not at last year’s volumes, but demand is still robust, and our order book takes us into the early part of 2022,” said the fencing contractor. “Demand for our timber buildings is also strong and my feeling is that home improvements are still happening off the back of saved pandemic income.”
The Construction Products Association (CPA) summer forecast in July also sees RMI continuing to perform robustly through this year into next.
“Output in March 2021 was 19.3% higher than pre-Covid times due to the ‘race for space’ – ie demand for a better quality outdoor domestic leisure space and home office work environment,” it stated. “SME contractors are still reporting RMI projects lined up for at least the next six months.”
Demand for fencing is also reported to have been driven by a buoyant new build sector and, after growing 20.9% in 2021, the CPA predicts house building starts rising a further 9% in 2022.
Besides a shortage of skilled labour, the key constraint on construction, it added, was the cost and availability of building products and raw materials, “including paints, varnishes, roofing materials, copper, steel and timber”.
As far as timber is concerned, fencing producers generally bear witness to the fraught supply situation. One reported “reasonable supply levels and lead times from main and secondary sawn timber suppliers”, but long delays in machined items, including TGV, loglap and waney lap panels.
“In the main, our suppliers have kept up with demand, but we’ve also needed to buy alternative products to convert in-house, such as 22×100 blanks to make featheredge and 75×75 sections to 2ex for arris rails,” said a producer.
One sawmiller said they were operating a “managed volume system”, limiting customers’ orders so they could supply as many as possible.
“We’re now seeing some market cool off, but demand, including from the fencing sector, is still at unprecedented levels due to the home and garden improvement boom,” they said.
“UK sawmills were already running very efficiently, so there was little slack to satisfy increasing consumption. We’d invested to increase our fencing capacity and our overall production is 20% up on last year, but we’ve still had to operate managed volume. We have, however, succeeded in increasing customers’ allocations. Those who might previously have placed orders around 100m3, we’re supplying 110m3. It’s not the 120m3- 150m3 they wanted, but it shows we’re trying to be supportive. In this environment, the emphasis more than ever is on partnership with customers.”
The latter have asked the company why it could not add a third shift to up output.
“We’ve explained that’s really not feasible,” they said. “When would we do maintenance and where would we get the trained staff and the logs? Also, what would we do with the co-products? The co-products sector just can’t absorb another shift’s worth.”
The consequence of the demand and supply imbalance has, of course, been timber prices increasing, as one fencing producer said, “in a way we’ve never seen before”.
“Some sawmills have been raising prices by 7.5% per month and others taking on orders without being able to tell you the price,” said one manufacturer. “To give some certainty to customers we’ve got a price freeze until October on main sawn lines. But we’ve made them aware we’ll be playing catch up on October 1.
“When TGV suppliers asked for a 50% overnight price rise, on top of the 7.5% increases requested with each previous order, we did have to increase prices to customers. We put it to them first; would they be happy to try to pass on the increase or should we tell suppliers no thank you. It was a 75/25 split to accept.”
A sawmiller said fencing product prices over the last 14 months had risen by 70-90%. Featheredge boards are up from around £200 to £370-380 and a UC4 post from £220 to £370.
Despite this, until very recently demand continued unabated.
“Regular loads in to our yard, up to five a week, have usually been 95% pre-sold,” said a fencing producer. “Visitors would have been forgiven for thinking we were selling bearers if they came into the yard, as we were devoid of stocks on the ground.
“We’ve seen some improvement in the situation lately, but now, of course, the main mills are going on holiday, so for the first time in our history we’re closing for one week, purely to preserve stock.”
High prices and long lead times do not seem to have led to any increased consumer switch to fencing in other materials, although the AFI maintains the “significant” migration to more “reliable materials” for ground contact components has continued.
Some easing of the market is now reported by fence manufacturers generally, as well as sawmillers. One of the latter forecast further moderation into the autumn.
“A customer cited four reasons why we’re going to get increasing push back,” they said. “One was the unexpectedly high cost of holidaying in the UK rather than abroad, curbing consumers’ spending. Then there’s people going back to the office so having less time for DIY. Others are coming off furlough to find their zombie jobs are redundant. Finally it’s prices reaching that point where consumers ask ‘how much for a fence post?!’.”
As a result, they said they saw raw material supply and demand moving more into equilibrium, with growing volumes of timber on the ground.
A fencing producer agreed the market was at or nearing a turning point and was hoping soon to see “improvement in stock levels and stabilising or some reduction in price”. What they were concerned about, however, was the possibility of a sudden radical reset in the sector.
“We’re fearful of a complete meltdown as end users either find prices too expensive or go on holiday,” they said. “The danger then is being left with expensive stock we’ll have to sell at a loss.”
A sawmiller, however, expected a more measured market readjustment.
“I think we’ll see mills stock building and feathering back production, knocking off a shift rather than risk prices tumbling,” they said.
While one producer TTJ contacted has good orders into the New Year, it sees demand gradually dropping back to below 2019 levels.
“Having faced the perfect storm driving demand – people at home with spare time, money to spend and good weather – we’re now past the market peak,” said a spokesperson. “So many projects have been done and consumers are returning to spending money elsewhere.”
But his company, for one, he added, has come strongly through these challenging times.
“Overall, having this period of demand has increased profitability, helped bring investment plans forward, reduced borrowings and put us in a healthy position for a future in whatever shape it comes,” he said.
