The fencing market is returning to normal after the boom months that followed the winter storms and floods.
Demand soared up to five times normal levels in the spring, leading to a black market and even thefts from out of the ground. The scramble for finished products and components may have subsided, but stock levels are still lagging and raw materials remain scarce or pricey.
Sources told TTJ that log costs rose by 20-25% and fencing timber by up to 30%, although prices to end users appear to have been held to single-digit increases as fencing manufacturers rely on volumes to offset the deficit. One regional manufacturer with its own sawmill that supplies to both the trade and retail said that during the peak, customers had been waiting at the gates every morning. Sales were 50% over forecast halfway through the year.
To meet demand manufacturers have taken on more staff, reshuffled production and, in some cases, added machinery. There was a clear consensus that the upswing went beyond the effect of the weather and was assisted by an economic upturn and strengthening in the construction market. However, sources warned that there was a risk of overtrading and some companies could suffer cash flow problems next year.
"Any fencing that would have needed replacing anyway in the next few years was blown down over the winter, so if it snows next December to Easter, trading conditions are going to be very difficult indeed for those who think this could be the norm," said a senior figure in the sector.
Manufacturers have all spoken of materials in short supply. Several companies said they generally acquired 50% home-grown timber and obtained further supplies from the Baltic states, Germany, Belarus and Canada. They had to look overseas on the spot market. Prices paid now exceeded £200 per m³, although one regional company said the type of product available was also restricted.
Pre-Treated Timber The source said he had to buy some timber already treated by the supplier rather than use his own treatment plant.
"I presume it is so they can get the extra margin. Having it come in treated does make it instantly available for sale and the difference in cost doesn’t make or break our margin so I can live with that."
"There has been a 30% increase at cost – we have been paying £190-210 a cube – but we have only put our prices up overall by 6-7%. That doesn’t mean a reduced margin because the volumes have been so much higher. We have done 50-60% more in turnover, so we didn’t need to look at a huge increase."
He said that he had generally been able to gain supplies, but panel slats and battens had been difficult as mills appear to have been sending them to their larger customers and he had to concentrate less on waney edge and more toward featherboard and closeboard sold at a discount.
A source in harvesting said the frenetic scramble for logs had calmed, but he believes supply will be an issue for the remainder of the year and into 2015. He said log prices in England and Wales were about 20% higher.
"It was a perfect storm; you had the storms and flooding, and at the same time there has been an increase in construction, both in new and refurb and all that needs fencing.
We could supply roundwood to our existing customers, but we couldn’t keep up with all the demand we saw.
Lead Times Shortening
"Generally, talking to sawmillers, lead times have been coming back down to six to eight weeks, when at the beginning of the year it was months and months," he added. "I think there was a degree of rationing, but I also think they saw an opportunity to weed out some of their less reliable customers."
Despite shortages, contractors appear to have been able to acquire the fencing they need, albeit at a premium. "I haven’t heard of any contractors who can’t fulfil a contract because there was no timber. I think a lot of the talk has been from the sheds, trying to hype the situation to get the people in to buy products made from the low grade wood. For higher quality contract work, it has been a matter of price."
One manufacturer said he expected his stock levels to stabilise by mid-September. "We are still busy and we are flat out to get all our stockists up to their normal levels. All our bigger customers are back to where they want to be. As soon as it was hitting the floor, it was sold. Now when we go back a week later there is still some left."
However, he has reservations about whether such a huge bubble had helped the industry and who had benefited. "The sawmills have done very well and the stockists and retailers; the manufacturers in the middle have enjoyed the extra business, but their gross margin has been squeezed by materials costs, extra staff and even unit transport costs."
Another source confirmed there was a risk of overtrading. "Any expansion we have made has been because of the general uplift in the economy. We have stuck with our planned investment and have taken on some more people, but we had already been planning for some retirements and staff turnover."
