US Perspective - 9.6.15
09/06/2015
www.themaxfieldreport.com
Reports from members of the cowhide trade report the vast majority of sellers started last week with offer lists in line with levels of the previous week as sellers looked to hold prices steady. Meanwhile, there was negative news coming out of China; not only economic but also efforts by the Ministry of Environmental Protection, which continue to wreak havoc on those selling cowhides, especially in the northern part of the country.
In addition, a number of tanners continue to struggle with cash flows attributed to tighter lending controls by Chinese central banks, but also due to inability of many tanners to sell their drop split inventories, lower leather prices and slow payments by shoe makers.
As for sales last week, sources claim that sellers were able to hold prices of HNDC relatively steady. Meanwhile, HNC and HBC were more difficult to sell as these selections are usually the favourites of tanners in northern China and were facing increased competition from Europe and Australia as producers in these countries also appear anxious for sales. In addition, we continue to hear of large unsold inventories of Brazilian wet-blue hides, which will weigh more heavily on HBC.
Overall, prices on HNDC reported steady last week, while producers appeared much more willing to negotiate prices on HNC / HBC towards the second half of last week, leading to thoughts prices down at least a dollar on these selections.
THE LOOK AHEAD
As to what we expect for this week’s hide trade, in our opinion the elephant in the room is the fact that demand is down considerably versus levels of a year ago, thus we are seeing lacklustre demand from Chinese tanners. The other side of this argument by those selling hides is that Chinese tanners are simply “waiting” for a better price point to enter the market and we continue to hear speculation by sellers claiming they expect tanners to act “soon”.
In the meantime, sellers continue to try to leverage their supply side argument and, considering last week’s slaughter for the first week of June reflected a “robust” 550,000 head (lowest week of June in more than sixty years), who can blame them? However, if we are being realistic, it is likely a blessing for those selling hides that slaughter levels have been running on the average 40-50,000 head below levels of a year ago, as one can only imagine where prices would be.
That said, additional negative news last week were isolated reports of automotive requirements from a few of the smaller automakers in our opinion reflective of the slowdown in car sales in China, while the US is also exhibiting signs of joining other major economies and experiencing a couple of “hiccups” on some of the economic numbers coming out for May.
The big question this week is if sellers will finally adjust their asking prices to reflect asking prices closer to the most recent trading levels. Popular opinion of the trade is that majority of producers are anxious for sales, especially sales of particular selections, ideally in moderate to larger volumes for prompt shipment and this is why we remain of the opinion we have not yet seen the lows for the year on hide prices.
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