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Leather Pipeline: sharp rises in raw material prices would be wrong

Leatherbiz Weekly on September 8 includes the latest in our exclusive Leather Pipeline market intelligence report.

On this occasion, Leather Pipeline focuses on tensions that have appeared anew between tanners and suppliers of raw material since the end of the summer holiday.

Automotive and furniture upholstery tanners are recovering well from the downturn. Car companies are pressing the accelerator on new models and are also working through a backlog of orders for existing models that built-up when most factories were in lockdown. In parallel, millions of people are continuing to spend much more time at home than they used to and demand for new, good-quality, leather-upholstered furniture is healthy.

Leather Pipeline argues that raw material suppliers have looked at this situation and have concluded that, if customers can pay more for hides, they should pay. “This might be fair if the normal supply-demand balance were in place again,” the report says. “However, the high volume of existing stocks sitting in storage creates a different market situation.”

It explains that tanners are aware that there are still hides, from inventory, looking for a home. Consequently, they see no real need to bow to excessive asking prices for the hides coming out of abattoirs now.

Sellers, on the other hand, are hoping that they can recoup some of their losses by raising prices and, thereby, also putting a higher value on their stocks.

“Both are right,” Leather Pipeline concludes. “That is why the situation needs sensitive handling. Moderately higher raw material prices are necessary, but it is advisable to take a sensible approach to pricing for the rest of the year.”





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