¦ Fencing panel prices are likely to rise again.
¦ June fencing sales were disappointing.

Since the start of the year, when the freezing winter weather slowed business to a trickle, fencing manufacturers have experienced some improvement but uncertainty still clouds trading.

One large garden products manufacturer told TTJ that so far it had been a “solid” year, with similar volumes to 2009.

He added, however: “There has definitely been a waning of confidence in the market just before and after the election and there is uncertainty because of spending cuts.”

He reported a certain element of nervousness in the market and a difficulty making predictions, adding that he was “cautious” about the market outlook.

“While the spending cuts won’t directly affect the amount of domestic fencing and related products purchased, the resulting lay-offs from the public sector may depress spending,” said another large fencing manufacturer.

He said after a year of destocking among customers, the company was hopeful of better trading in 2010 but bad weather in mid-December to early April had severely depressed the domestic fencing market. “No-one wanted to go in their gardens and stockists could not be persuaded to replenish their stocks,” he said. “Predictably May was very busy for us – a record month as stockists had to buy in to satisfy orders rather than draw from their own stocks.”

Hand-to-mouth ordering

He said June sales were disappointing and customers were still stocking largely on a hand-to-mouth basis. However, the company is trading ahead of budget for the month.

“Overall in 2010 we are behind budget due to a poor January-April but, given that stockists will not be destocking to the same extent this year, we are hopeful about the tail end of the season,” he said.

The increased cost of timber is a dominant issue. One contact witnessed small roundwood timber price increases of 20-30% in the first few months of 2010, but said using its own sawmilling operations had helped with continuity of stocks.

A sawmilling contact supplying fence components said its roundwood prices had grown by 15% this year and it was difficult to pass these on. “Things are fairly busy,” he said. “But I wouldn’t say that people are falling over themselves to pay increased prices.”

Another contact said 2010 has witnessed some of the fastest rising timber prices in memory, and fencing panel prices are likely to increase again. He said merchants, DIY and other stockists who buy a lot of timber have understood the situation and appreciated the need to increase cost prices.

But he also reported fierce price competition as certain smaller manufacturers priced aggressively earlier in the season. “There is now a clear divide between the margin aspirations of some of the national stockists and those of the smaller players, resulting in almost a two-tier structure of retail pricing,” he said.

Late payment among customers was also cited as being more of a problem.

Raw material supply

Competition with other sawmills for raw material has been “intense”, while demand from the biomass sector remains a concern for the medium to long term.

Supply and demand are roughly in balance but with so many fence panel component mills having been decommissioned over the past two or three years, any return to better times could cause major shortages, said one contact.

And he said the strength of demand for pallet timber and other wood products had reduced mills’ desire and ability to provide a prompt and responsive service to the fencing industry, with orders having to be placed further in advance.

The recent announcement of the suspension of Latvian State Forests’ FSC certification “will only make matters worse”.

“Going forward, only fencing suppliers who are able to carry significant winter stocks will be able to guarantee their stockists a prompt and reliable service when the new season takes off,” said the contact.

Stockists have tended to concentrate their stock holdings on the faster-moving more commodity lines.