German Perspective - 14.7.20
Shipping space to Asia is tight and slow steaming extends the voyages which means that tanners in Asia will need to plan well if they are looking for timely arrivals of any attractive hides from Europe. They would have to be bought soon to arrive in time for the busy winter season.
Automotive production is resuming quite quickly now. The holidays are looming, but most factories are running at reasonable levels again and are just suffering from the uncertainties of the supply chain for all components: a screw missing and the belt stops. At least they can be sure that leather will not create a bottleneck.
We are also entering the period where cashflow becomes an issue too. Lower hide prices will have compensated for a while, but shrinking turnover due to covid-19 and the generally slow second quarter could become a factor soon.
Usually the problems get serious after the summer when the turnover and revenue gap of the summer combine. This year it could come earlier and one can only hope that government subsidies or other aids in combination with small incoming invoices keep the cash blanket big enough.
Another critical phase will follow when business expands and maybe even prices rise again. While retailers are complaining about lacking sales it is surprising how many articles are not available: sizes, models, parts, there is always something out of stock. What that tells us is that in the initial covid-19 panic too much was stopped and too many thought that the apocalypse had come instead of analysing rationally.
This creates two risks. One is decisions taken too late in combination with slowed delivery and a second in fewer sales. Despite all the problems as the consequences of the pandemic, we remain positive for the upholstery sector. People will spend less on holidays this year and at this stage are preparing to stay home this winter, which means investment into homes.
Less travel could however also mean more local outdoor activity which could provide an opportunity for quality footwear and creative garment solutions. We will learn in the coming months if the leather industry got ready in time.
The week had a good start but slowed towards the end. In Europe the regular programmes continue and we are watching carefully when we see the uptick in demand from automotive tanners, which would be the logical result of improving vehicle production.
The kill: After a slow week, a better one followed. The forecast is not too bad, but we have to consider the influences related to the ongoing shutdown of one of the largest processing plants due to covid-19. Weights remain good.
What we expect: We live from week to week. The EU tanners will not be the key players and so all will now depend on the strategy of the Asian customer base. Some activity from the local clients for the restart after the holidays should also be expected soon.
