A generally decent third quarter for the UK fencing sector has been replaced by more sporadic business activity at the start of the fourth quarter. Meanwhile, the already tough market conditions facing pallet manufacturers have been exacerbated by the deepening decline in manufacturing activity.

The fencing sector appears to have enjoyed reasonable to good demand during the summer. Most sources are now anticipating an increase in turnover for 2001 as a whole compared with last year, thanks in no small part to the better weather that has enabled the public to shower more money on their gardens.

Sheds and decking sold particularly well this summer although there appears to have been no real improvement in prices. One leading contact said ‘very good’ seasonal demand for sheds was attributable in part to the need for more garden storage space.

As for decking, the flow of business has continued unabated. The Timber Decking Association predicted recently that the UK market alone could exceed £100m this year compared with less than £5m just four years ago. Several contacts reported having managed to engineer a small price increase for decking timber during the summer.

Prepared to pay more

Among other products in demand, one operator pointed to a more than 20% increase in sales of ‘old-fashioned waney-edged panel’ this year as well as a sharp upturn in trellis demand. ‘People are determined to have a better product in their garden and are prepared to pay more for it,’ he said. ‘I expect this trend to continue for the next four or five years.’

Although this year is shaping up to be an improvement on 2000, there is little expectation of a buoyant end to 2001 for the fencing sector, with business described at best as ‘patchy’. One operator said: ‘There are still pockets of people who are busy but others are working hand to mouth. Whatever the government statistics say, the housebuilding sector is slowing.’

As for 2002, ‘I’m not thinking about that as yet’, he said. He acknowledged that continued job losses would ultimately have an adverse impact on consumer confidence and spending patterns but added that, for the moment, ‘nobody has stopped buying’. Pre-season deals might be required in November and December to encourage stock building, he added.

Baltic backlog

The situation in the Baltic states has also had an impact on recent activity. A UK fencing material/roundwood specialist said his company had benefited from an order backlog in the Baltics – particularly in the more specialised product areas where material had been ordered direct from the mills. At the same time, there was evidence of customers ordering from the Baltics and then looking to UK suppliers to offer the same price in cases of supply shortfall. He complained: ‘So many people in the UK promote overseas material, but when it doesn’t arrive they expect us to respond in a week.’

Another fencing contact rued the delays in obtaining orders from the Baltics and said his company was reviewing whether to switch more towards local sourcing.

Registrations are now being lodged for the voluntary UK marking programme for wood packing materials introduced this month. The initiative is designed as a stepping stone towards implementation of a global wood packing standard to help minimise the risk of ‘exporting’ pests. Approved packing material can be bought by – or reused by – exporters in other countries without further treatment, to send goods to Britain.

The marking programme was agreed between the Forestry Commission‘s Plant Health Service, the Forest Service of the Department of Agriculture and Rural Development for Northern Ireland and the Timber Packaging and Pallet Confederation (TIMCON). One of its architects this week said the scheme appeared likely to become a catalyst for similar action elsewhere, given that requests for details had already been received from organisations and industry representatives in other countries.

According to one expert, the marking scheme would ‘open more doors’ for approved product, given growing worldwide concern about the spread of pests, adding that the initiative ‘should increase demand for higher quality pallets’. While the scheme is acknowledged as an important advance, the main preoccupation remains the state of trade.

UK demand for timber packaging is described as ‘depressed’. Several pallet producers reported ‘mixed messages’ over timber supplies, with reports of both higher prices and low offers. Baltic suppliers to the UK market have been hit by price pressure and exchange rates, to the extent that some mills have been mothballed. Access to forests has also been restricted. Several contacts pointed to delays in shipments from the Baltics and a resultant increase in demand on UK forestry businesses that sell into the timber packaging industry.

But as several pallet contacts pointed out, the cost of buying raw material is of much reduced consequence if there is no market for their final product. Global economic and political uncertainty has done little to boost commercial confidence and movement of goods.

The widespread decline in the UK’s manufacturing base is having a long-term negative impact on the pallet sector, while the terrorist attacks on the US and subsequent bombing of Afghanistan is said to have led to a drying-up of wood packaged deliveries to many destinations – notably the Middle East.

Quieter than usual

An export packing specialist said: ‘It is definitely quieter than usual and we have had to bring our prices down, which is not normal. Customers are cutting back on their needs or are going out of business. We are only maintaining the same business levels we have had all year – even though we have picked up new customers.’

A pallet industry source added: ‘We have tried to get a price rise for our product but pallet customers won’t stand for it. It is not a good time for us to be asking for a price increase and, if we are not careful, we will let other materials in.’

Over recent months, the UK pallet market has offered a contrast to the wider European scene in that supply of material has been slow, although not to such an extent as to affect production and delivery continuity. Overall demand in Europe is expected to slow in the fourth quarter principally because of seasonal factors, with the southern Continent expected to fare better than counterparts in the north. Pallet prices across Europe have generally remained within a narrow band over recent months.

Some UK pallet firms are taking a positive approach and earmarking further investment in their production facilities. A contact at one such company rejected the gloomy tack taken by many in the industry, adding that similar downturns in demand had been witnessed – and survived – many times in the past. Pallet companies needed to concentrate on ‘good housekeeping’ in the months to come, he suggested.

Another company recently to confirm a pallet-related investment was Northumberland sawmiller A&J Scott. The company acquired Manchester-based Northern Pallet Services Ltd for an undisclosed sum but made clear that the move owed less to expansion than to logistics and the drive for improved efficiencies, enabling the company to manufacture closer to source.

EPAL clears the way

Also on an upbeat note, it has now become easier to join the European pallet organisation EPAL following removal of nail joint sampling requirements. A spokesperson welcomed the move, saying that existing timber and nail certification requirements used in conjunction with modern manufacturing techniques meant that ‘the joint was always going to be approved in any case’. Withdrawal of the sampling requirement would mean an acceleration of the certification process, he added.

Among other issues facing the pallet sector, it was suggested this week that packaging waste regulations are now ‘starting to bite’ and that some buyers – notably those with little experience of the industry or with a ‘short-termist’ mentality – were responding with a reduction in their specifications. One manufacturer said he had refused business on the grounds that he did not consider the specification to be fit for purpose, while at the same time acknowledging ‘there will always be producers out there who will do the lower spec’.

American pallets

Coincidentally, the American pallet association NWPCA has contacted members worldwide to stress the importance of pallet specifications. Poor design was resulting not only in product damage and additional costs, but also damage to the reputation of those involved and the industry in general, it said. There was evidence in the US of timber pallet producers selecting inappropriate species, sections and fixings simply to meet price criteria.

Meanwhile in the UK, TIMCON confirmed recently that it would be circulating pallet design guidelines to all of its members.

Also raised this week was the continuing influence on the pallet market of on-line auctions. ‘I am still exceedingly wary of them,’ commented a senior industry figure. ‘The last one in which I took part was priced below the price for which I can buy the timber.’