German Perspective - 27.8.19
27/08/2019
One can’t be surprised when we consider the political situation around the globe. Economy is over 50% psychology. Some may believe that fear, uncertainty and conflict is a good environment for business. This might be true, but only for a very selected number of sectors. For the majority it is not what consumers and corporations need to take positive decisions for consumption and investment.
The leather industry has unfortunately various additional problems and this continues to weigh on decisions and confidence. This applies to a great extent to the tanning industry in China which is traditionally extremely sensitive to the political and economical environment while in Europe it is simply too early to expect any big news yet.
That is also what many forget these days: Asia has a longer lead time and they have to take raw material purchase decisions early to get the right material in time. That means that they are sometimes running blind, because when they buy the leather, orders are not confirmed. This means that you have to have confidence, or otherwise wait until the last moment to gain as much security as possible. They either buy standard and ‘one size fits all’ or are extremely selective for quality and pay more, then get stuck with too many selections, which causes headaches.
Although it is different in Europe, the players forget in a year. The discussions about the next (winter season) are only taken between mid-September and the end of October, with the exception of automotive. Until this is clear and tanners know how much they are going to produce they are not able to plan their raw material requirements and so nothing really changes until then. This happens every year and we will assess the sentiment at the various trade shows that are taking place over the next 6-8 weeks.
The end of the week brought some more excitement. Bids from China were the same as the weeks before - for better quality material only. The moment the news came from the meeting in Jacksonville and the information that China would impose new tariffs on US goods, the bids were withdrawn and all postponed to next week.
Not much will happen next week and if the tanners do what they normally do, they will wait for the fair in Shanghai and see if they can get some bargains.
In Europe the market was rather quiet with the exception of specialty deals. Smaller and specialised tanners continue to look for their niche products and the general problems in the industry do not affect them, quite the reverse: several special raw materials sold out due to strong demand.
The kill: The kill continues to normalize and the numbers continue to rise slowly. Summer is returning after a few weeks of colder weather. Weights have also passed their annual lows and are starting to climb slowly again.
What do we expect: Difficult to forecast. In Europe several contracts are due for renewal. More tanners are also coming back, while in Asia tanners will wait for the visitors. So, we might see some more activity next from the European tanners while any big deals in Asia would be a surprise. We are now entering the decisive eight weeks for leather demand this winter. Politics will continue to play an important role.
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