In true British tradition, no market report would be complete without some discussion of the weather. However, the nation’s obsession with meteorology is more than normally justified given the recent combination of floods and high winds that have had a devastating effect on housing in many areas, and thereby a substantial knock-on effect on the fencing sector.
On the one hand, the poor weather has provided a sizeable obstacle to fencing work while, on the other, it has created a significant backlog of repair work and generated widespread optimism for the coming year.
One operator summed it up thus: ‘When the weather has not been too bad, we have been very busy.’ Another confirmed: ‘The strong winds meant that we had a bumper November, with turnover almost as high as in the spring. But the rain in December killed the market into January.’
Other operators contacted this week were somewhat more downbeat in their assessment of late-2000 trading levels. One pointed to the five days of deliveries lost during the petrol dispute: ‘You never get back what you lose. The fourth quarter was disappointing for us and dampened what had otherwise been a very good year for us all.’ A senior spokesperson within a major fencing concern suggested ‘the wettest year in Britain for around 130 years has had a significant effect on demand – had it not been for the weather, 2000 would have been a reasonable year’.
A south of England sawmiller who supplies home-grown timbers to the fencing trade suggested that the gales experienced in October last year had been largely responsible for ‘the best November we have had for four years’, although in many respects this mini boom had served only to make up for ‘the worst September and October for three years’. The wet weather continued to affect his timber extraction activities to the extent that one production line had been forced to operate at around 50% of capacity since the start of the new year.
A prolonged period of dry weather was now required, he said, for extraction problems to be entirely overcome.
A fencing supplier looked at the situation from the reverse angle: ‘We can make plans and talk to customers, but we need the weather. We have taken such a hiding over the past few months and any more floods would be disastrous for business.’
Staying with timber supply, hopes have been expressed among home-grown timber processors that prices of Latvian material might be about to rise. However, any increase was not expected to offset the losses sustained as a result of a reduction in residue prices, according to one sawmill operator.
For the moment, there are few developments to report on the price front, although recent movements in the dollar exchange rate have undoubtedly had some impact in real price terms. Meanwhile, several operators confirmed that they had imposed and maintained an increase in delivery charges in the wake of the oil price boom.
While the bad weather has led to an increase in fence repair work, the decorative side of the garden products business – including the likes of decking, trellis and pergolas – has been all but killed off by a combination of wet ground preventing people from working on their gardens and a lack of disposable cash following Christmas.
Good prospects
That said, prospects remain excellent for decking and other decorative products in 2001, according to most market observers; indeed, the Deck Supply Co recently announced that it was looking to capitalise more fully on decking market growth in the UK by widening its offer to builders to include all-inclusive deck construction kits and a free design/ specification service (TTJ December 2, 2000).
It is the generally held view that, weather notwithstanding, the UK can expect renewed vigour in the ‘fashion fencing’ sector from spring-time at the latest. ‘In terms of home-grown,’ said one contact, ‘we hold a big advantage over imported timber from any source, as long as we provide the service and the quality, because we can offer stocks of what is required when it is required.’
The new year began with a sense of unease among com-panies supplying fencing materials into the DIY retail sector, not least because of the ‘confusion’ surrounding some of the major DIY chains. The £285m cash purchase of Great Mills by Focus Do It All, for example, has prompted fears that the enlarged group will accelerate DIY superstores’ erosion of small merchants’ business.
Further consolidation within the DIY market will almost certainly mean ‘casualties from the supply point of view,’ said a leading supplier. The increased purchasing strength of enlarged groups could put further pressure on the already low prices secured by suppliers, he said, adding that his company’s latest retail price survey revealed economy fence panel prices to be ‘ludicrous’, with margins pared to the bone.
The rounds sector has reported regional variations in demand, with a particularly slow start to the year in those heavier specifications used in the housing market and public sectors.
Meanwhile, sellers of round wood have been given cause for concern with the news that Jeffrey Walker & Co Ltd’s mill at Costhorpe in Nottinghamshire, is to close and that the company’s production is to be concentrated on its remaining site at Haworth, West Yorkshire.
Turning to fencing sector news, Forest Garden plc – the new name for Forest Fencing – has confirmed that its new £5m facility at Steven’s Croft in southern Scotland came on stream on January 8; the aim, said a senior company spokesperson, was to have the plant running at near to full capacity before the end of next month. The mill will have a first shift output of around 40,000m³ per year and a second shift production of 35,000m³, and will more than double the company’s UK processing capability. Production will concentrate on spruce and pine for garden products and fencing.
If reports on the state of the fencing sector could be said to be mixed, then the pallet sector is almost universally downbeat. A senior figure in the UK pallet industry confirmed that the market remained ‘volatile’ with ‘too much capacity available for the volumes needed’. The result is fierce competition for any arising business and low, low prices.
He went on to say: ‘ Buyers have the luxury of holding firm on orders because there are a lot of suppliers vying for the business. They would be better served securing their pallets from a bona fide supplier of quality product rather than focus just on price.’
He also contended that, with timber pallets now significantly cheaper in real terms than they were several years ago, they offered ‘excellent value for money’ as well as a more environmentally-friendly option compared to plastic alternatives.
With pallet demand said to be static, prospects were unlikely to be improved by the consolidation of some of Britain’s largest businesses, according to one source, since this would eliminate over-capacity in other industrial fields and would therefore lead to a reduced requirement for pallets. Thus, the problems flowing from overcapacity in pallet production appear certain to continue. Not for the first time, there were predictions this week of more casualties in the UK pallet production sector.
‘Increased automation of pallet making is great if the volume of business is there,’ said one source, ‘but you have to have that mountain to go at.’ Nevertheless, the fear of losing ground to competitors and the desire to maintain a modern profile continued to force producers down the path of greater automation, he said.
The downward pressure on pallet prices in the UK was being intensified as much by domestic operators as overseas competition, according to another source. He suggested that, with stocks deteriorating in quality over time, some people were looking to offer some of their surplus pallets at knockdown prices.
On a more positive note, one respected industry player reported higher than normal movements of pallet wood to UK sawmills. He had even heard talk of price premiums being achieved although he acknowledged that good news in the pallet sector remained rare.
European prices
In Europe, pallet prices have remained stable for the past few months while, in more recent weeks, demand has sustained its anticipated seasonal downturn. In what has become an established trend, demand from southern Europe is more buoyant than that from the north. At the same time, sea freight and shipping space is said to be ‘tight and expensive’, with bad weather identified as one of the key causes. Shipping problems are reported in the Baltic, as well as around Portugal and the Mediterranean.
On the timber supply side, the French still have ample stocks of logs left from the major windblow more than 12 months ago. Reports suggest there are ‘still no problems with the quality of this material’. In eastern Europe, meanwhile, the weather is cold but not too wet, therefore providing generally favourable conditions for timber cutting operations in the forests.
As for new developments, PalletLink has produced a new version of its technical datasheet on chemical pallets known as the CP range, containing statistics on volumes manufactured by more than 250 pallet makers as well as, for the first time, information on safe working loads. According to PalletLink, ‘it is essential that pallet makers are able to recommend working loads to their users based on more than guesswork’.
