Friedrich Sturm Report - 28.09.07
02/10/2007
What happened this week: Most people are seemingly finding it difficult to get used to the fact that the easy times are over. This has been the case for quite some time. Hide prices have gone into a reverse trend since early spring and, although the reasons are plentiful, the extent of the trend is not uniform and those in the mid- and average-quality markets have suffered most.
The key question discussed by many is if the trend is ongoing or if we are close to reaching the bottom.
This week was certainly not a good one for the optimists. Market activity slowed even further. The pessimists will feel that their argument has become more convincing with the falling US dollar, and rising concerns and gossip about increasing stocks of unsold male material.
Trading during the week was consequently light and the main interest was again focused on dairy cows and low grades. Males just move within their long-term and regular customer base. The valuation of medium and higher quality male hides has suffered most from the devaluation of the dollar and the massive pressure on leather prices.
More sophisticated finishing technologies are adding to the situation. These give users the idea that they can produce adequately finished products with lower quality raw materials. With leather demand still reasonable, and the results of the recent trade shows being mostly positive, leather demand in total volume is not the problem; the issue is the price of raw material.
With Asia being on holiday either this week or next, and most European tanners being covered at least until the show in Bologna in three weeks, it is hard to find any good reason why much activity should be generated in the weeks to come.
The instability of the financial markets and a much higher rate of uncertainty have changed the fundamental mood, and players have become much more cautious in their attitudes and purchasing decisions.
European hides are facing two major problems: one is the strong euro against the weak dollar, and the other is the price structure of the leather demand, which is not favouring the upper average raw material.
From the leather markets one doesn’t hear much news. The recent trade shows for shoes and leathergoods have been positive. The feedback from the upholstery events is still missing, but after the fair in Bologna, we will have enough input to make our minds up for the rest of the year.
The limited volume of sales this week was on almost unchanged levels, but this was all just against requests and not offers However, we would not like to be forced to sell additional material into today’s market and search for clients.
A number of clients are receiving offers from people and places they never heard of before, which has made them wonder where all these hides had been sold and shipped to in the past.
The kill: The kill is still on the low side of the seasonal expectations. The after-summer rally has (fortunately) lost speed and it will probably need colder and more rainy days to increase slaughter numbers again.
What do we expect: Currency markets are making it difficult for Asian tanners to pay European prices and their European rivals will continue to take advantage of this. The next weeks will be interesting to learn how much stock is really out there and what sellers decide to do with it. We expect the market to continue on this weaker trend at least until mid-October.
Share this story:
