German Perspective--23.03.10
23/03/2010
Buyers from the shoe factories hadn’t much time to sort their reports from Düsseldorf out and international visitors had to squeeze the trip into their schedules around the Hong Kong fair and the trips and visits in Asia. The amount of leather business and orders that must be in tanners hands is pretty impressive.
As a European one cannot help wondering where all the leather products that are obviously filling the order pipeline at the moment are going to be sold. Tanners would not buy all the hides if they didn’t have orders to cover. Bologna is a show for leathers destined to the shoe and leathergoods production.
It was fascinating to see all the classic and beautiful leathers tanners had prepared for their customers. There was a lot of pleasure to be found walking down the aisles and to see what was presented in the various booths. Maybe it is the recognised beauty of the product which is finally attracting all the buyers.
The fact is, however, that the hides that one had brought to the show found quick and ready takers and we would be surprised if any seller has taken many hides home again. This applies in particular to good, light material, which is the main target of the show.
When the discussion came to profitability and economics, however, the situation was completely different. Buyers of leather opened discussions with clear positions, that they are not in the position, nor willing, to raise leather prices. Their ears were completely deaf to the recent raw material price increases and they were just repeating their positions, that calculations do not permit any increase in leather prices and their calculations and budgets for the coming season have already been finished and closed.
Most tanners are struggling with that. Either they are committed to contracts and have to pay now the inflated raw material prices, or they don’t have the position and courage to play hard. Some exceptions are there and we have heard of tanners who stated clearly that either the increases are paid or they will reduce their deliveries. Some buyers were shocked and they certainly have fewer alternatives than ever before. What has been a buyer’s market for ages has become more and more of a seller’s market in the past months. This is, however only the short-term vision. The consequences are obvious. If the situation persists leather manufacturers are going to reduce the volume of leather in their designs and collections. Sales were on lower levels, because of reduced availability rather than a lack of interest. Prices were on full asking level and interest was across the board.
The kill: The kill was finally a bit bit better this week, maybe as a result of some improvement in the weather. Slaughter statistics for January were released early in the week and showed a 7.9 % decline, which explains a bit of the recent market movements. It seems that the number will stay on the present levels next week.
What do we expect: The situation is relatively easy. There are no hides around. This will keep the market firm. The next step will now be the show in Hong Kong. Asian tanners showed interest recently, but they resisted the recent prices. If they also need to buy again we will see their next move, but take care—this has never been a one-way street.
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