Generally favourable weather and an early Easter holiday period had provided the UK fencing sector with an early-year sales boost. However, generally miserable weather in the early part of the summer and a number of “distractions” – including the football World Cup – have since conspired to wipe out the earlier gains made by many companies.
The UK pallet industry, meanwhile, remains in a state of depression on the back of lacklustre demand, continuing overcapacity and the absence of any apparent scope for moving prices forward.
The fencing sector too has found difficulty in securing any form of a price increase. Many operators contacted this week confirmed that early season business had easily exceeded expectations, but complained that sales had shelved off quite dramatically during May and into June. Most have also reported an unspectacular start to July in terms of trading activity.
Sharp downturn
According to several reports, some of the UK’s leading fencing manufacturers have responded to the sharp downturn in business by cancelling timber orders.
Even those operators who are continuing to experience reasonable market conditions were talking this week in terms of a slowing of the sales momentum since the start of the summer.
The reason for the general downturn in sentiment appears to extend beyond the fickle British weather. Bank Holidays in early June reduced the number of trading days while the football World Cup dampened sales activity.
Dependent on weather
One fencing industry contact estimated that sales over the past couple of months or so have been as much as 40-50% down on the corresponding period last year and that any upturn is almost wholly dependent on an improvement in the weather. Looking at individual garden products, sales of fencing and trellis appear to have been particularly badly hit.
On a brighter note, there has been a continuation of the trend among the UK public to move away from a standard fencing product to more decorative panels. Furthermore, there is evidence that homeowners are increasingly prepared to pay more for a stronger fencing panel. Sales of slats and feather-edged boards have reportedly remained quite good.
The Timber Decking Association said recently (TTJ June 22/29) that there were no signs of a slowdown in UK demand. Enquiries lodged with the TDA increased by 200% in January-May 2002 compared to the first five months of 2001.
Baltic timber continues to enjoy a price benefit of around 10-12% in comparison with home-grown supplies. While most contacts reported no problems with shipments from the Baltics, there was an isolated suggestion that a significant number of outstanding orders placed with some mills in the region had remained unfulfilled and that buyers had been forced to seek supplies elsewhere while trying to maintain their budgeted price levels.
Some domestic sawmills have pushed prices higher by a few percentage points in certain product areas but there is concern that the new levels may not hold.
Summer shutdowns
A number of sawmills have announced summer shutdowns, leading several contacts to suggest that they would have tried to remain open if the order outlook had been more favourable.
From the packing sector this week came complaints of a massive increase in insurance premiums, with one company boss calculating that his premiums were set to rise by anything between 650-850%. This phenomenal increase has been attributed to the fallout from the September 11 terrorist attacks and to an apparent decision among insurance companies to “look more seriously at the woodworking industry”, according to a leading sector spokesperson.
According to some reports, the UK pallet sector has witnessed a slight upturn in demand over the past few months, although this has not been reflected in higher sales prices in what remains an extremely competitive market. Pallet logs are “moving out of the forest” and users “seem to be taking more volume”, but manufacturers are universally reluctant to pay any more for their pallet timber.
Pallet manufacturers are generally gloomy about near- to medium-term prospects, not least because the UK’s manufacturing sector is showing little sign of a revival at a time when pallet prices are already at “a disastrously low level”, as one contact expressed it this week. Pressure on pallet manufacturers continues to be applied by on-line reverse auctions, which, to general agreement, are depressing prices.
