Raw material prices need to go “a decent proportion lower”
14/10/2014
“Nobody has any interest in a sharp and extended correction in raw material prices,” the report said. “A major correction in market prices could mean that stock valuations will be needed to be adjusted to lower market values. In a year that has already not been too easy for many as far as margins are concerned this could be a serious and even dangerous influence on company results for the year 2014.”
But at the same time it said “the long cycle of rising prices” has run out of steam now and put forward the view that some buyers of leather have been put off by rising prices as well as by a consistent message that the reason for the increases was that hides were in short supply. According to the report, a glance at the new footwear collections reaching shops in Europe and the US now for the autumn-winter 2014-2015 fashion season shows that alternative materials have replaced grain leather and in some cases splits in many models.
“There is enough raw material around and suppliers will have to decide what they are going to do with it: continue to keep asking prices at or around the levels we are now experiencing or be ready and willing to adjust prices to levels that are a decent proportion lower. For us it is more a question of how and when, rather than if, this is going to happen. If we want to prevent more damage to leather demand it is time for price adjustments.”
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