• Demand for fencing is expected to be more stable this year.
• Some fencing manufacturers have not increased prices, despite higher costs.
• The Highways Agency’s orders for posts and rails is strong.
• Demand for pallet logs is strong but some pallet customers are still working through last year’s stocks.
• The strong euro has provided opportunities for UK pallet producers.

Nowadays, there is a tendency for markets to talk themselves into trouble at the first sign of negative economic news. Worries over the global repercussions of America’s economic woes have certainly made confidence a rarer commodity in nearly every sector of business, including the UK fencing market.

But in a direct echo of comments made recently by a number of leading players within the UK chipboard sector, key figures have stressed that the domestic fencing market has not suddenly slumped; rather, it has returned to something nearer normality following a period of significantly stronger conditions. A leading supplier of fencing timber was at pains to point out: “Volumes are not that bad, and certainly no worse than normal for this time of year.”

High winds early in 2007 helped last year’s fencing season get off to a racing start that, thanks to a subsequent period of seasonally good weather, was maintained for longer than most in the industry had anticipated. Supply issues then kicked in to create what one contact described as “the perfect storm”. But these components have been noticeable by their absence this year, leading most players to concede – even at this early stage – that demand “probably won’t sky-rocket this year”.

Reasonable order levels

A leading supplier of fencing and other garden products reported good demand in January followed by reasonable – “but not stunning” – order levels in February. The result was that, in volume terms, the company was running behind the first two months of 2007 but ahead of the corresponding period in 2006. Demand from the retail sector had been “steady and consistent” and orders from the garden centres were “about on budget”, whereas builders merchant business was less robust. The growth areas had included top-end outdoor living spaces and garden products at the lower end of the market, he added.

In common with most other suppliers, the same company has not increased its sales prices despite a significant escalation in its costs, notably for fuel and power. Another fencing company confirmed that it had also opted to keep its prices stable – at least for the time being – after pushing levels significantly higher during last year’s boom period. At the same time, he pointed to decent orders from the new housing sector since the start of February but slower sales this year into the domestic replacement market.

In the past, fencing suppliers could count on the arrival of Easter to kick-start demand but, as mentioned above, other factors now tend to play a larger part in governing the direction of the market. One fencing supplier believes the Easter break will fall too early in the year to have a significant impact on fencing orders. “We have budgeted for a pent-up demand from last year when people could not get fence panels,” he said. “But mid-March is too early for people to trust the weather and we expect more of a lift around May.”

Price drop

Most domestic fencing timber suppliers have reported a limited drop in prices compared with the same time last year. “The market is pretty solid,” TTJ was told by one of the majors. “Our build-up to Easter is running reasonably well and there is every expectation of a normal demand for this year.” Another pointed to a noticeable pick-up in orders for timber destined for domestic fencing since the middle of February.

At the same time, some contacts reported “hefty deals” being done by suppliers driven to turn excess stock into cash – one described the price tag on a recent load of imported feather edge board as “unbelievable”. Another said that “over-ordered material from last year” is still on the quayside and available to “people prepared to take a chance on it”. He added that, unfortunately, the presence of such material “sets a base for the market”.

Suppliers emphasised the need to maintain their prices at relatively high levels to offset significant hikes in haulage, kiln-drying and general energy costs. At the same time, several pointed to reduced pressure from fencing timber imports from the Baltics where suppliers were grappling with their own set of issues, including growing domestic demand, log availability and prices and exchange rates.

Beyond the domestic fencing business, demand for round material for agricultural and landscaping applications has been “very good” while post and rail orders from the Highways Agency have been brisk of late. According to one supplier, the agency was now “recognising almost exclusively” material conforming to the requirements laid down in the Sector Scheme 4 for timber preservation.