German Perspective—13.01.09
19/01/2009
What happened this week: We believe that almost everyone has appreciated the long break to enjoy the season with their families and to get away from the recent challenges of the hide and skin business. Unfortunately it seems that not much has changed in the meantime. Europe has already taken a break and now the Asian customers or, specifically, Chinese ones are preparing for their New Year Festival and with the insufficient order books most people are running at present many are taking a pretty extended break.
At the same time they also have the hope that their regular customers from the export markets are finally going to turn up and that a lot of the orders they are missing today were just being postponed and will be placed very soon.
We all know, that the high season of production should be running already and if production does not improve very soon we will lose almost a full season of leather production in Asia for the export markets. The past weeks delivered little news and what has been noted was definitely not very positive.
The automotive industry remains in a very difficult position and sales numbers are getting worse from month to month. The Christmas shopping season failed to deliver much of a clear picture. However, it seems that the cold winter in Europe and the lack of sales of big-ticket items have supported the sales of shoes at least on the European continent.
Anyone who is not completely depressed in China is confirming that the domestic business has been pretty normal and some even dare to say that also the handbag business hasn’t been too bad. This cannot compensate for the dramatic reduction in the production of upholstery and automotive leathers, though.
Looking at trading activity, it’s no surprise that it has been pretty much limited and minimal. Patchy enquiries led to isolated and small sales. This past week interest was a fraction better, but at least in our case not widespread and pretty much focused on individual clients. Consequently, trading volume and the number of sales have been limited and have given no clear direction. Prices were pretty much currency-related and if one had a bit of a lucky hand in the currency market one was able to maintain almost steady price levels compared to the period prior to Christmas. However, in general the US dollar has lost about 5% against the best levels seen at the beginning of December and this is has been reflected in export revenues. European buyers were non-existent and the vast majority are only reopening this coming week. Credit insurers continue to cancel or reduce limits, which is going to make activity in Europe more complicated in the near future. Letters of credit are coming in, but definitely not as easily as one would wish.
The kill: There is not yet much to say about the kill. During this season the numbers where obviously pretty low. This week the kill has improved but was definitely reduced by the bad weather conditions. The kill should not pick up from now until mid-February.
What we expect: Our optimism remains still pretty limited. Too many negative influences will prevent the market from rebounding in the short term. So we agree with those who expect the market to bounce around the levels which we have seen since mid-December and most of the price changes will derive from the currency market.
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