Understanding the Current Fencing Market

If you think that things are slowing down a bit after a couple of years of good sales, you are probably right. Many of the manufacturers, contractors, and suppliers in the fence industry who experienced excellent growth over the two Covid-related years* are seeing some drop off during the first half of 2022.

To some extent, this should have been expected. You must look back at what made those years unique and realize what has changed. Here are few things to consider when planning for the rest of 2022 and beyond.

At the beginning of the pandemic, much the fence industry was deemed “essential” by the U.S. government. That meant that projects that had to be put on hold due to Covid opened other opportunities for fence, especially when the residential market increased due to DIY jobs skyrocketing. Many of the market conditions that created those opportunities have reverted to pre-Covid conditions, with more competition now back in place and running at full speed. That means more competition (again) for workers, for materials, and for contracts.

Inflation has soared over the past two years, affecting everyone and everything. The first part of 2022 saw the (hopefully) worst of it, which meant higher prices, especially for transportation. Businesses had to make decisions on how much of these new costs could be passed on to customers without pricing themselves out of being competitive. Meanwhile the Federal Reserve, which held interest rates as low as possible during the pandemic, is trying to push down inflation by raising those interest rates. Small businesses, especially in the construction industry, see those rate increases impact their lines of credit, their ability to finance new projects, and to do accurate business planning.

The Biden administration, after seeing its domestic agenda grind to a nearhalt, was energized by the passage of a toned-down, but still large, spending bill (the Inflation Reduction Act). There was some good news in the bill for construction/fencing, because the bill includes even more funding for the renewable fuels industry (a large user of fencing). On the downside, it also included a 15% minimum tax that will impact manufacturers hardest.

There is no getting around the fact that Covid changed everyone’s life, and everyone’s business. The return to normalcy is still in its infancy but there is no new normal – yet. Still, there are some things companies can do to prepare for the near future.

LOCK IN LOANS AND LINES OF CREDIT NOW.

The Fed has been clear that their target is 2% inflation – it’s near 9% now. They only have so many ways to impact inflation, and raising rates is the big one. So, start using your financial partners to be ahead of those raises.

RAMP UP YOUR MARKETING/SALES IN SOME OF THE MARKETS THAT ARE GETTING GOVERNMENT FUNDING OR ARE HIGH PRIORITY MARKETS FOR FUTURE FUNDING.

Infrastructure, renewable fuels, heath care, and schools are some of the more obvious ones. Some of the infrastructure projects outlined in the Build Back Better bill will start taking effect with the passage of this new bill and the end of the fiscal 2022 year. In whatever market you choose, be in it for the long run. Enhance your company’s reputation in these industries though effective use of social media and other communications tools. That way, when the current slowdown picks up, you have stayed on the radar screens of your industry partners.

KEEP YOUR EMPLOYEES UP-TO-DATE ON WHAT’S HAPPENING IN THE MARKETPLACE.

Help them connect what they are hearing on the news and social media about these factors and talk about how they impact the operation of the company, and their jobs. Keep it simple - no need to do a discussion of all the details. Just let them know they are part of the team, so you want them to be informed.

Ups and downs in the fencing industry are not new, they have been around since the industry started. In today’s marketplace, the reasons for those ups and downs are a little more complicated. Understanding those factors, and preparing for the next market swing, are the keys to the rest of 2022 being profitable for your company.

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* Of course, there is nothing to assure that we won’t have other outbreaks of Covid, monkeypox, or other world health crisis in the near future.