German Perspective—07.04.09
What happened this week: The whole trade was focused on the APLF show in Hong Kong this week, and those who didn’t travel were phoning friends who did to get the market insights everyone was so desperately looking for. The show largely offered the same pattern it has been offering for the last 25 years since the event launched. This pattern was one of great excitement until halfway through the event, and then a fall back to reality.
This is only partly true, because the medium to higher end was finding markets and clients in a reasonable mood, while the low end continues to struggle. As a general statement, one could probably say that the market pattern that has been seen for some time is still valid today. Shoes and leathergoods, and particularly the better leather and raw materials, are still enjoying pretty decent demand while the upholstery, garment and automotive segments continue to struggle.
Despite the positive note for the better material, everything still comes down to price. At a certain level, the Chinese are willing to buy better quality material, but when this cannot be achieved they step out. As a result, many sobered up quickly after their first round of customer meetings.
In terms of business, it seems almost everyone has done bits and pieces, but nothing has been particularly impressive. Regular clients took up some courtesy deals and in Europe one or two loopholes were filled. Prices were a fraction firmer on bull hides while the weak US$ and ambitious bids from Asia would call the market for cows weaker. Small hides and quality calf are still getting a good market reception confirming the trend for better materials at today prices.
The kill: The kill has steadied out a bit. Hide weights are set to start their seasonal descent now. The weather has improved and it should only be a matter of weeks before the field cattle will see fresh grass and the sun again.
What we expect: Clients seem to have filled their immediate needs and we think that selling hides could become a bit more difficult again in the second quarter. It might still be a few weeks before this happens and we could see market reactions. With good shipments in March and reduced inventory and slaughter, the market is likely to be rather currency-driven over the next few weeks until new decisions are made and before we know whether we are being too pessimistic.
