While the pallet sector has remained mired in overcapacity and lacklustre demand, the fencing sector has witnessed high levels of activity – largely on the back of good weather and an early Easter break.
That said, pallet and fencing operators both have to contend with a highly competitive market in which there is little room for price increases.
Easter brought excellent sales across the board, with some DIY sheds reporting sales up to 40% higher than in the same period last year. The generally good weather clearly induced people into their gardens and, with an extra Bank Holiday in June, garden product specialists suggested this week that a bumper second quarter may well be in prospect.
The Easter upturn has been welcomed after a rather muted start to 2002. The turning point for most came in March, with one operator describing recent weeks as ‘busier than I have seen for the last four or five years’.
Financial year end
He attributed this phenomenon to improved domestic sales and pressure on local authorities to get budgets spent ahead of the end of the financial year. He described demand for feather edge board as ‘insatiable’ and said enquiries were ‘coming in left, right and centre from people I’ve never heard of’.
Another fencing specialist said daily output had achieved its highest level and that April was likely to bring even further increases. Another had anticipated a fall-off in demand following the Easter upturn but this had not happened. ‘Highways Agency expenditure goes on and on in both acoustic and post and rail,’ he added.
A noticeable improvement has also been seen in farm fencing demand – possibly the result of the agricultural sector catching up with work put off during last year’s foot and mouth epidemic.
Healthy sales of pergola and lattice timbers also highlight this move towards incorporating more decorative products in the garden.
And despite worries of the market over-heating, further growth is anticipated this year by major timber decking suppliers.
Unfortunately for the fencing fraternity, this upturn in demand has made little impact on prices, possibly because operators are fearful of losing business in a still fiercely competitive market.
Continuing low timber prices remains a key issue in the sector since current levels are hardly tempting for growers. Several industry sources were pointing to shortages – for instance in fencing slats and 4×4 posts – whereas others talked in terms of extended delivery times.
Another major concern for the fencing sector concerns proposals in Europe to restrict end uses of CCA-treated timber (TTJ April 13). The European Commission is considering comments received during a recent consultation period and, following further discussions, is expected to present its final position towards the end of this year.
Bad start for pallets
As in the fencing sector, 2002 started badly for the UK pallet industry. By contrast, however, there has been no sign of an improvement throughout the first quarter, except for a pre-Easter blip as customers moved goods ahead of the break.
If anything, pallet prices have fallen below their already-low levels and the sector’s perennial overcapacity has been exacerbated by falling demand from the UK’s gradually eroding manufacturing base. As an example a contact pointed to developments in the fertiliser industry, which had been a high-volume purchaser of two-way entry pallets until several years ago.
This steady reduction in the overall size of the market has led to an ever-fiercer and often damaging struggle for business. Clients have become accustomed to low prices based on Latvian imports, according to a contact. ‘If they can’t get Latvian material, they still want Latvian prices for UK material,’ he said.
Supplies from Latvia were hit by mild winter conditions leading to boggy ground and problems with log extraction, although a regional expert confirmed this week that the situation is now returning to normal.
A regional expert noted that supply from Portugal had dwindled virtually to nothing because the timber was uncompetitive compared with Latvian and home-grown. Little volume was now coming into the UK, except for end uses where Portuguese maritime pine was particularly specified.
A senior source within the pallets, crates and cases sector believed that many suppliers were fairly busy but confirmed that margins were still under heavy pressure. A proportion of the blame for downward price pressure was once again attached to on-line reverse auctions, described by one senior industry figure this week as ‘an absolutely dreadful way of doing business’.
Another contact lamented the inability of the pallet industry to kick out of its downward spiral: ‘It is the same old story. The industry is struggling on margins and this will eventually have to lead to more casualties.’
