German Perspective—09.03.10
09/03/2010
What happened this week: As the week progressed, activity slowed down. This applies in particular for the standard North German hides while the specialties are still enjoying decent demand and good clearance of the limited quantities that are available in the market. So, again, everybody could pick what they wanted depending on their interpretation of the market trend. However, we don’t think that anyone can deny, that the dynamic and enthusiasm seen until mid-February is starting to cool down and the upward trend is (fortunately) stopped. This might also be related to the rise of the US dollar, which has stalled since the beginning of February. Although market activity is never nil, buying and selling is becoming more and more hand-to-mouth and the timing shorter and shorter. The interesting matter is that the boom market, China, is no longer willing to accept all the offers around, and more and more resistance is being felt. It is also interesting that letters of credit are no longer coming with the same speed as they used to. So, while we have no real concerns about the market, the steam is coming out of it. It seems that everybody is waiting for a new market impulse.
Possibly the next serious input will come from the fairs that we have in front of us. The fair in Bologna has a new timing and is pretty early (March 16–18). We have to see if this is too early or the right timing. The good clearance of retail stocks as a consequence of the cold and long winter will invite retailers and manufacturers to be more flexible with orders for the coming winter season. Most reports from leathergoods brands are also good, so demand should stay steady and good. This, however does not resolve the problem of prices, but we shall see the results at the end of the show.
At the end of the month the trade will gather again for the Asia Pacific Leather Fair in Hong Kong. Despite all the pessimism about the future of the event, it is still a pretty important trend indicator and a meeting place for trade members from all over the globe. It offers many the chance to travel in Asia around the dates of the show (March 29–31 this year) and the best chance to get a clear and reliable picture of the mood and expectations in this, the main leather producing region.
As we have already said, trading activity is fading. Neither buyers nor sellers are willing to expose themselves or to take long-term commitments. In Europe more and more tanners are now starting to evaluate the option of cutting production in view of the losses they are making with today’s raw material prices. How serious they are about this remains to be seen; it will most likely be April before we know. In China it will be interesting to see if higher raw material price levels have an effect on soakings. Interest during the week was more on males rather than on females and the $60 barrier for dairy cows seems also this time to be a magic level. Sales were close to asking levels—a fraction higher for extra heavy hides, and just about steady for others.
The kill: We can skip thoughts about the kill. It is steady, but on the low side and seeing hide weights that are very light and far from normal at this time of the year.
What we expect: We fail to see anything that will move the market in the short term. Tanners seem to be less desperate for hides at the moment and sellers seem to be completely happy with administrating their existing sales and positions. So, there is no trigger for a new trend yet and we might have to wait until the end of the month before we see one.
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