US Perspective—13.03.18
13/03/2018
www.themaxfieldreport.com
Reports from the big packer trade are that the market continues to face a substantial amount of underlying pressure. There are rumblings about some of the packers who are travelling being accused of selling product last week at levels $2-$3 lower than their official asking prices; however, we are not aware of any of these reports having been confirmed.
Other packers continue to convey to customers that they are still able to achieve prices several dollars higher than levels being reported, which is only leading to further confusion in the marketplace. As to sales concluded last week, the consensus is that it is highly unlikely that packers sold a week’s worth of production; sales appear in line with the past several weeks. With some of the packers travelling and claims that some of them were attempting to conclude some business quietly, it makes quantifying a bit more difficult.
Packers continue to make their best effort to hold prices as close to steady as possible, while we are aware of some selections trading $0.50-$1.00 lower last week. Reports from Asia claim there are producers from various points around the globe travelling in Asia this week and sources report that many who are travelling appear to have more than ample supplies of hides for sale. Tanners confirm that some of the offer lists they have seen appear fairly populated as well; however, as of this writing, it appears as if buyers and sellers are still “feeling each other out” and it’s unlikely there have been large rounds of business concluded.
In regards to leather business we have spoken with a number of people both stateside and overseas who do not have a lot of good news to share about side leather business. In conversations with these pundits, they continue to confirm that the shoe-upper business is falling short of expectations of tanners, while handbag business is mixed, as there continues to be decent orders for luxury handbags, while demand for medium-to-lower end handbags appears not as brisk as this time last year. There are reports of many of the major brands looking to book new orders; however, the price point they are targeting is being deemed too aggressive for most tanners, even though current trading levels are more than 25% lower than levels of a year ago.
Reports on the furniture trade claim business is mixed; some tanners continue to enjoy decent orders, while reports from other tanners claim orders have been a bit slower since Chinese New Year. Most automotive tanners appear as if they continue to enjoy decent orders; we have heard of a few who are complaining their order books are not as busy compared to the second half of last year, blaming the dip in auto sales in the US and Europe. In addition, many members of the automotive trade are keeping a close eye on actions to impose tariffs on steel and aluminium, which could create a trade war with an impact on the sales of luxury automobiles.
Reports from the cowhide trade claim producers continue to struggle. Most producers entered last week with offer lists that appeared fairly populated, while there was widespread speculation that several producers had multiple selections for which they were looking for volume sales and for prompt shipment. In the meantime, there were rumblings accusing a couple of the larger producers of concluding some direct business with trading levels well below the prices on our price guide. Meanwhile, as to interest this past week, sources share that it was not much of an improvement over the past few weeks. Buyers appear as if they are willing to receive offers; however, few if any, have any real sense of urgency.
There are continued reports there are more than ample offers of cowhides from Europe as well as plenty of offers of Brazilian wet blue hides.
This coming week we will see the APLF exhibition take place in Hong Kong (March 14-16). Traditionally, there usually are not many hides traded at this fair. However, if we look back to last year, it certainly was an exception. Packers the entire month of March in 2017 were emphatically insisting that they were well sold and refuting attempts from tanners to buy at lower levels. That said, on the first day of last year’s APLF, one of the big US packers started trading at levels $4 lower than the market at that time, which started a chain-reaction and all of the packers were scrambling for sales at lower levels by the end of the fair.
If we take the USDA export figures at face value, producers are entering this coming week with more than a million hides unsold, while speculation among some members of the trade is that producers are holding out for what they believe will be some large, pent-up demand from tanners who will need to cover their leather orders for the upcoming busy season. What will be interesting to hear next week are the reports of those who travelled prior to the fair to hear how the inventories of tanners looked compared to a year ago, and how many drums were turning. In addition, we are also going to be interested to hear how much finished leather tanners have on hand.
We are not sure if much has changed in the marketplace dating back to the end of November. Demand has been lacklustre, while the number of hides produced on a weekly basis continues to exceed levels of a year ago. As a result, it is likely we will see hide prices drift until we see a sizeable improvement in demand.
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