The British are famous for their obsession with the weather. But the fencing sector has every excuse for dwelling on the subject when the climate is threatening to undermine what should be one of the busiest and most lucrative periods. Add in the continuing restrictions imposed by the foot and mouth crisis in the UK, and the result is a far from happy fencing industry.

The pallet manufacturing sector is also complaining about the effects of a prolonged period of mixed weather following on from the floods which devastated large areas of Britain last year. For instance, demand for pallets from the building sector is said to have been dented because builders cannot gain working access to many sites. The poor weather has deepened the air of depression in a pallet sector already blighted by oversupply, poor prices and lacklustre demand from UK industry.

Looking at the fencing sector in more detail, the adjectives applied this week to trading levels in the UK ranged from ‘disappointing’ to ‘diabolical’. Hope expressed earlier in the year by home-grown timber processors that Baltic timber prices might be about to rise has proved largely unfounded, despite higher freight rates, energy and port duty costs. Feedback from Baltic mills suggests many ‘may not be flush with orders’, said one contact.

Dismal trade levels

In the UK, prices have barely changed and remain low; at the same time, the levels of trade have reportedly been ‘dismal’ in recent months for ‘virtually anything involving going into the garden’, lamented a leading supplier of fencing and other materials into the garden centre and DIY sector. There was now real concern that Easter would be totally undermined by the prolonged spell of poor weather, which has left the ground too wet for a large proportion of UK gardeners.

As a rule of thumb, he said, sales were under pressure on garden items for which there was a requirement to dig a hole such as fencing and decking; however, for other items such as garden buildings, sales were continuing at a relatively normal pace. DIY and garden centres appeared ‘pretty well stocked’ and so there was now ‘some worry as to whether these goods will sell through’. He added: ‘There is evidence of pent-up demand but we need a good run of weather.’

Others involved in supplying fencing materials suggested there were some signs of an upturn in business during the weeks immediately prior to the Easter break, although the general view was that the trade was not as busy as normal heading into the holiday period. ‘The uncertainty is the worrying thing,’ said one. ‘If we get a late season, it usually goes on well into the summer, but there are a lot of people who are worried it won’t happen this year.’ According to one leading fencing operator, timber sales were down in terms of volume but ‘decorative timber items have been selling better’. There was also an improvement reported in pre-Easter sales of bark by-products for the garden centres.

Promotion efforts

Some of the major garden and DIY centres have launched highly attractive promotions on the likes of fencing in a bid to lure the British public back into the garden. However, these retailers appear to be operating some way below budgeted levels and the impact of this shortfall is feeding itself back down the supply chain. A major garden products producer observed: ‘It will possibly lead to some casualties in the sector.’

Some fencing contractors too have reported an inability to start or continue with certain projects because of ground conditions. Foot and mouth disease has also prevented access to certain parts of the country with the result that, according to one fencing operator, some of his motorway fencing and farm fencing contracts had been put off. Another added: ‘Some people have been trying to pull logs out of private estates, but they can’t get on to the land because of foot and mouth restrictions.’

By contrast, other fencing contractors are reporting considerably higher levels of activity, with some claiming to have found more than 20% of their normal annual turnover in March alone, despite the rescheduling of some projects. One commented: ‘Suppliers and manufacturers are being hit hard and that ususally comes down on the contractor too. But we haven’t had to give back any of our margin to get the business.’

The acoustic fencing sector appears to be offering most encouragement of all, with the Channel Tunnel rail link and motorway work mentioned by several contacts as particularly substantial sources of business. In this regard, the Highways Agency and Railtrack have given their support to a qualification scheme for fencing contractors that is due to come into force from May. According to the Fencing Contractors Association, companies seeking general fencing work from these two organisations will have to meet certain criteria, that is to say: they must be quality assured, must use quality assurance registered suppliers, and must have had specific health and safety training. Transco is thought to be considering following this same route for its fencing contractors.

Pallet sector

In the pallet sector prices have fallen in recent months from what was an already low level. According to one experienced industry player, ‘prices are very competitive and are now the lowest in real terms that I have known – and there are no signs of any improvement’. Another said: ‘People are selling at, or very little above, cost. There are some stupid prices going about.’ While there has been talk of a rise in timber prices, he added, the prices for both pallet timber and for the finished product ‘are still falling’.

Lacklustre demand

The root of the problem appears to be lacklustre demand from the leading UK end users of pallets. With economic downturns in both the Far East and the US, a seed of caution appears to have been sown within UK industry. ‘Manufacturing in Britain is not very sturdy at the moment and the pound is also continuing to create a problem,’ TTJ was told this week. ‘Pallet demand at the moment is not as bad as it could have been, but we had low expectations to start with. It is still pretty dire.’

From the Europallet perspective, timber specifications are said to be ‘pretty cheap at the moment’. The UK market is described as ‘not very busy’ but, by contrast, Spain and to a lesser extent Italy are said to remain lively markets for Europallets. Pallet production in France has recovered following a quiet period induced by ‘seasonal factors’. It is expected that timber supplies in France will continue to be influenced at least until the end of this year by the major windblow of 1999.

According to a number of UK industry sources, another worry surrounds the increasing influence of Internet pallet auctions (the subject of a TTJ feature on May 5).

‘People are tending to buy on price and some of the delivered prices are lower than what I can buy the timber for,’ complained one pallet manufacturer. Another agreed: ‘People only seem to be interested in price these days, but what about quality? Sub-standard pallets can be dangerous.’

The principal worries surrounding the growth of these Internet auctions include quality and the ability of participants to service the orders booked. There was also concern that delivered product may not correspond to what has been ordered via the Internet. ‘I think there is a great risk that people who do not know much about pallets just get the enquiries in and then go out and source anything they feel might be appropriate,’ said one contact.

There are some reports from the export packing sector of a slight upturn in trade over recent weeks but few signs of a long-term improvement in business. One leading operator described demand as ‘patchy’ and operations as ‘somewhat hand to mouth’.

However, timber packaging operators have much more than poor market conditions with which to concern themselves. Under new international phytosanitary regulations to be issued next April for 12 months’ consultation, all timber used for packaging products will have to be heat treated to a core temperature of 56°C for 30 minutes – and might also have to be kilned to 20% moisture – before being marked (TTJ March 31).

The UK timber pallet and packaging association TIMCON has pointed out that most pallets and cases use unseasoned timber and that all drying facilities are fully in use. Therefore, more kilning capacity is required in the UK and Europe to make the rules more feasible, while every effort should be made to ensure rules on marking are reasonable, the association has argued.

TIMCON is also concerned about the European packaging waste directive and has stressed the need for manufacturers to influence the formulation of the proposed European pallet repair standard aimed at underpinning repair quality.

Positive note

On a positive note, the pallet trade reacted in upbeat fashion this week to news that TIMCON intends to approach the UK government with the results of German research which indicated that wooden pallets were more hygienic than plastic rivals for the transportation of food. Conducted by the German Institute for Food Technology, tests showed the germ count on commercial wooden pallets was 15% lower on average than on plastic ones, while hygienic timber pallets made from fir heartwood recorded around half the microbial load of plastic pallets (TTJ April 7/14).