German Perspective—02.03.10
02/03/2010
GERMAN PERSPECTIVE—02.03.10
What happened this week: Trading activity is now slowly fading week by week, but there is still enough non-saturated demand out there to absorb all the hides that are on offer. Although there is consensus that raw material prices are too high and tanners are not making any money with the present replenishment costs, it seems that many tanners are more afraid of not having enough raw material to keep productions running, rather than stay out of the market in the attempt to calm the situation and to bring prices back into line with their calculations. So, even with less volume traded the heat remains on and one really wonders how long this can go on.
Butchers are extremely enthusiastic and are playing their cards aggressively. They feel a lot of support from the huge number of inquiries they are getting from all over. Most of this interest has no real basis and is just the result of the present market situation where B and C markets see that, for them, there is not enough supply available as sellers have better quality customer options. The process of forcing competitors out of the market is in full swing again and the situation, which started in 2007–2008 and was merely interrupted by the financial crisis, is as evident again as it was before the collapse.
This is not going to be a one-way road and seasons will still be reflected in the price trend, but fundamentally the raw material supply can presently not feed the capacity and demand of tanneries. Survival of the fittest is the logical, evolutional and economical consequence. Talking about survivors it means that there also will be casualties.
The consolidation process on the supply side, and the fact that the quality of customers and payment terms have become a dominating argument today, leave little room to breathe. Either they pay more or they have to deal with lower-quality raw material. Otherwise their access to raw material will be cut and both options are not really helping very much in the market place. Since there is no indication of a significant short-term slowdown of leather demand nor an increase in supply, the market balance has to be achieved by taking capacity off the market.
Of course the low price for raw material in 2009 was the invitation for many who are non-regulars in this trade and they just took the chance and will disappear as quickly as they came, but it will still need a little time until this will have an effect on the overall picture.
If there is anything worrying apart from the financial issue it is the rumour that in some parts of China larger wet blue stocks are being seen. Trading this week was less active from the main markets, but still enough to clear the offers. Prices were about steady and the variations were very small. Much higher asking prices were refused and lower bids as well.
The kill: The kill is just about what one would expect at this time of the year. The winter has lost its grip now and the snow is melting quickly away. Weights are exceptionally low at the moment, which is weighing on calculations.
What we expect: Despite the positive pictures we have drawn, our concerns remain in place. However, low stocks still protect the market.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Share this story:
