Excellent weather has undoubtedly encouraged the British public into their gardens over recent months, with indications from some fencing suppliers that business levels were higher during the summer than for a number of years.

The summer sunshine, along with reasonably decent weather in the spring, has provided a springboard for fencing price increases – of 8-10% in some instances – since the early part of the second quarter, it was suggested this week. At the same time, producers have noted a continuation of the consumer trend towards “more sophisticated”, added-value fencing products for reasons of durability and differentiation, resulting in increased opportunities to boost margins.

This healthy level of demand has extended beyond the domestic sector to housing associations and local authorities. The Highways Agency has also been an active customer and, according to reports, has responded positively to a demand from within the fencing sector for stricter enforcement of its own guidelines on Sector Scheme 4 suppliers.

Round fencing strong

UK demand for round fencing has maintained its particularly strong momentum and, according to one source, the finished UK product has benefited from an apparent reduction in competition from Ireland and the Baltics.

Fencing timber suppliers acknowledged the strength of demand this year but suggested a lull in buying activity starting around mid-July had led to “quite flat” prices. One experienced source suggested fencing manufacturers may have bought forward in an effort to become well stocked for fear of a repeat of the ice problems in the Baltics. “The end of the year will be crucial because it will show whether buyers are prepared to take a chance on home-grown or on bringing in stock from the Baltics,” he said. Another added: “The icing problems severely handicapped some buyers and they may be looking for alternatives.”

Softwood log prices in Latvia have increased substantially in recent months. UK home-grown timber sales have been strong although opinions vary as to what extent regular buyers of Baltic wood have switched – or will switch – to domestic material in order to achieve what they perceive as a more reliable supply route. That said, the past couple of months have brought no major changes in UK raw material prices. “We put prices up in the early summer but buyers were reluctant, and now business is a bit quieter they may feel they can get better deals,” said one UK sawmiller. According to several contacts, Irish sawmillers have been offering some highly competitive prices.

Rising overheads

It is believed in some quarters that UK sawmillers have failed to capitalise fully on the price movements affecting Baltic material. One contact suggested that home-grown timber prices needed to rise to take account of rising overheads, including higher fuel prices. In any event, he added, the bulk of any increase would have to be passed on to the growers in order to encourage them “back into the market place”. Many growers “are still not harvesting their timber because it doesn’t make economic sense,” he explained.

A leading concern within the fencing sector is the imminence of non-CCA treatment requirements, with several contacts suggesting that some operators were “leaving it late” to carry out conversion work, especially when bearing in mind that treatment plant suppliers appeared to be operating on lead times of several months.

Turning to other components of the modern British garden, the Timber Decking Association (TDA) is estimating UK sales growth of 10-12% this year on the back of approximately 30% increases during the previous three years. “All of our members are saying they have had a good year,” confirmed a spokesperson, who anticipated that total UK sales would climb to £110-112m in 2003.

On the downside, healthy demand for decking coupled with excellent summer weather had highlighted an increased prevalence of ‘cowboy’ operators whose work failed to meet even basic standards, according to the TDA.

Against this backdrop, the association is to reinforce its message to consumers to take care when choosing decking materials and contractors. It is also looking to introduce an approved decking retailer scheme and TDA training programme designed to boost retailers’ knowledge of decking and therefore the quality of advice passed on to the public. The first courses could be launched as early as January.

European Union membership

In a development that may have longer-term significance for the pallet trade, last month Latvia voted in favour of joining the European Union. As pointed out at the recent FEFPEB congress in Edinburgh, EU accession will almost certainly increase the legislative burden on Latvian businesses in areas such as health and safety, the environment and employment law. As a result, sources of cheap timber are likely to become narrower, leading to a rise in raw material costs for the pallet and packaging sector.

For the moment, the log shortages in Latvia have led to pressure on prices and bullishness among sawmillers. Some UK-based suppliers of Latvian timber are said to be “struggling to fulfil contracts, especially for out-of-the-ordinary specifications”.

There is said to be some level of acceptance among pallet makers that this raw material is having to carry a higher price tag, although one supplier lamented: “You lose an order if you try to get a price increase.”

The pallet manufacturing sector itself has reported no signs of an immediate easing of timber prices, partly because “availability has been more rationed from the Baltics”. Several contacts suggested that any repeat this winter of the ice-related supply problems in the Baltics would lead to “sky-rocketing” prices. “Major buyers of Latvian wood may look to have options this year after their experiences earlier this year,” was one opinion.

In a bid to stabilise their raw material prices, some manufacturers have been accepting a higher proportion of hardwood in their supplies. The offer of species mixed “at the supplier’s option” has proved particularly appealing to pallet producers because prices tend to be keen. One supplier observed: “When they state minimum requirements or specific requirements, that’s when the prices start to go up.”

UK pallet makers appear to be quite busy and have enjoyed generally higher levels of enquiry over the past couple of months. However, the sector continues to be afflicted by the familiar problems of fierce competition on price and overcapacity.

“Some success” has been reported in obtaining price increases for pallets although this upward movement appears to have been focused mainly on non-standard specifications and has by no means extended to the entire range of pallet products. “Perhaps it would be more accurate to say that there has been no suggestion of price reductions,” one contact observed.

With business having at least stabilised in recent times, pallet makers directed most of their fire this week at on-line reverse auctions, with several contacts alleging that these were responsible for dragging down specifications. Some customers appeared more concerned with budgetary constraints than with safety and so were prepared to accept the delivered product even if it did not match the agreed specification, one source contended. There was a danger that such practice would leap to prominence “only when someone gets hurt”, he added.

Phytosanitary standards

Another point of concern, as mentioned in TTJ’s previous fencing and pallets report, is the push at international level towards a phytosanitary standard. If implemented under its current guise, this would mean that all export wooden packaging material would either have to be heat-treated or fumigated before being given its ‘de-bug’ symbol of approval.

According to several contacts, many UK companies have yet to put necessary plans in place to meet these requirements, even though the European Union was expected to implement the so-called International Standard for Phytosanitary Measures (ISPM 15) by July next year.