US Perspective—06.01.09
12/01/2009
The Jacobsen Commentary and Market Opinion
Courtesy of www.thejacobsen.com
There is not a lot of news this week as many people have been off for the Christmas and New Year holidays. Many, but not all International hide markets were reflective of US markets with slight upward pressure as a trading range becomes established. This being said, the market has not rebounded as overarching global economic fundamentals remain poor.
In China, pressure remains on shoe, furniture, and leathergoods manufacturers as big name factories are closing every month. “More than 7,000 companies in Guangdong closed or moved elsewhere in the first nine months of this year,” the official Chinese media have reported. “It is common in Guangdong for factory owners to suddenly shut down their cash-strapped factories and disappear without paying their labourers.”
There are continued reports of price renegotiations and re-sales when cargo reaches ports, although to a lesser extent. Given the new levels of hide prices, tanners are burdened with pipelines of high-priced goods selling into a softer market while the brands’ expectations for lower prices are high. Tanners are rightly concerned that hide prices might rise steeply once leather prices have been set, thereby eroding margins into the future.
Most tanners remain very cautious about business after the January 26 Chinese New Year holiday, and few are willing to consider buying large volume or paying more than their last trading prices. In recognition of the holiday, tanneries are expected to be closed after January 10 through to February 5.
Across the pond in Europe there is little activity to report due to the Christmas-New Year holidays. Most tanneries in Arzignano, Italy are closed and will reopen on January 12.
Down under in Australia, the meatworks are closed until after the New Year with many planning to remain shut down an extra week or two. Amid constant rains, the demand for re-stocking cattle and feedlot purchases has increased. The 2008-09 winter grain harvest is forecast to be above that of last year and if feed prices for cattle should fall, there will be more incentive for farmers to hold onto cattle longer.
The Australian hide market resembles that of the US market. Prices have stabilised and traders are offering up a couple dollars, but a new level has not been established yet. Regardless, the sentiment has changed and sellers are no longer taking the bottom prices of a few weeks ago. Tanners are hopeful that finished leather orders will pick up after the New Year or the Chinese New Year.
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