US perspective - 10.9.13
10/09/2013
The vast majority of the trade has returned from the All China Leather Exhibition (ACLE) in Shanghai. Overall, members of the trade we have spoken with while at the show, or by telephone today, appear pleased with the results of the show as it certainly appear as if sellers of US hides were able to stop the decline in hide prices.
According to various sources, packers admitted that they did not see as much interest last week as the couple of weeks prior to the show. However, considering packers were able to move some decent volumes prior to the ACLE, many were not officially offering hides but willing to listen to bids.
Those still looking to buy packer hides last week found packers’ posture much more firm than the past couple of weeks. In fact, buyers who had aspirations of trying to buy at prices deemed the bottom of the market the week prior found packers unwilling to consider such levels and begrudgingly had to improve their ideas if they were going to buy hides.
Sources share that bids on HTS/ BS last week at $92-$93 delivered were met with counters at $94-$95 delivered, while ideas on BBS at $97 delivered and lower were countered at $99 delivered. Meanwhile, HNS appear as if they might be experiencing better-than-expected demand were bid at $98-$99 delivered: however, sellers realising the decent interest were reported to be countering as much as $101-$102 delivered.
We were able to round up a couple of sales pending over the weekend, as we have both packer regular weight HTS as well as BS trading at levels of $88, while we have sales of processor steer hides selling at $84.
Reports from members of the cowhide trade were also laying claims to producers enjoying a decent week of sales the week prior to the ALCE. According to sources, producers were able to “shore-up” their ailing sold-forward positions, and it is agreed that the majority of cowhide producers enjoyed much stronger sold-forward positions than competing big packers.
This resulted in those offering cowhides last week at the show raising their asking prices to the chagrin of buyers. However, it appears there were still enough buyers still looking for hides that we are aware of several instances where producers were able to register increases over the last traded levels from the week prior.
As far as trading levels, we understand HNDC are selling somewhere between $85-$87 delivered depending on origin, while sales of HNC last week appear as if $75-$77 were possible, again depending on origin. Meanwhile, trading levels of HBC were also higher as we understand there was decent interest on material in the north at levels of $65 delivered.
Worth noting is general observations by those in attendance last week that leather business for tanners is Asia is a mixed bag. Tanners involved in the automotive sector are extremely busy, while furniture upholstery tanners also appear busy, but not as busy as auto tanners. Meanwhile, shoe-upper tanners and most handbag tanners are not as busy as a year ago with various sources pegging the decrease somewhere around 10-20% lower depending on the tanner, due to a decline in Chinese domestic consumption.
THE LOOK AHEAD
As to what we expect to happen this week, we fully expect packers to continue to lay claims to being better sold forward and not needing to sell any hides again this week, especially with thoughts that slaughter levels are likely to fall below seasonal levels due to declining margins.
However, if we are being honest, we are disappointed with the export sales of last week and although producers collectively enjoyed a stellar week of sales, we were disappointed it was not substantially higher, especially given some of the conversations we had with sellers at the show last week.
That said, although there are claims by producers of wet-blue that they enjoyed some decent business when travelling the last couple of weeks, we have yet to see these “claims” show up in the form of sales, and remain of the opinion that there is still a fair number of unsold wet blue in the inventory of various producers.
In the meantime, it appears producers of cowhides are in better shape and with the number of cows in the slaughter mix running well below seasonal levels and expectations that this will likely work against those still in need of cowhides. The other point worth noting is that there appears to be an obvious shift in fundamental leather demand to more corrected-type grain leather for this autumn season. If true, this would bode well for cowhides and we tend to expect that in turn, it is likely we could see the difference between cows and steers narrow as we move through the remainder of the calendar year.
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