Don Ohsman's view from America

Published: 24 March, 2006

Hide prices have advanced a great deal since our last issue which was a surprise to many in the industry. Many Asian tanners had anticipated lower prices in January that did not occur, but were then confident that prices would fall during the Chinese Lunar New Year in late January and early February. However, most producers anticipated the lack of Asian participation during the holiday and were sold far enough forward to resist lower bids.

All this resulted in a buying surge during the second week of February that pushed prices of steers above and beyond the trading range that had been in existence for so long. Heavy Texas steers rose to $66 and even $66.50 with offering prices at $67 on 60/62lb averages by mid month. Butt branded steers, however, trailed Texas by $0.50 but were expected to catch up soon.

Branded steers sold in large volume at $64.50 early in February and ratcheted up to $65-$65.50 towards mid month. Colorados traded at $63-$63.50. Being the bell weather selection, Texas bring other branded material along for the ride.

Heavy native steers did not find the same interest as their branded brethren as automotive tanners found no need to chase after hides. This resulted in the abnormal situation of steers without brands selling at the same price if not slightly lower than those with one or multiple brands. It is not expected that this anomaly will last for long.

Also during the first part of February, a major furniture show was held in Las Vegas where retailers, importers and manufacturers remarked how successful their leather upholstery business was. Imports from China and other low cost producing countries matched growing consumer demand even as quality declined to meet retail price points.

During the second week end of the month, the semi-annual WSA or national shoe show took place in Las Vegas as well. Retailers reported sales gains in footwear, highlighted by women's fashion boots that consume large quantities of leather. Retail sales released around the same time reinforced industry comments that leather remains in the forefront of fashion in automobiles, furniture, footwear and accessories.

Finally, rumours filled with some facts surfaced of some tanners in China pushing through price increases on certain types of leather amounting to between 10-15 cts/sq ft. On a per hide basis, this could amount to $4-5 which will help to offset the large increase in tanners operating costs due to their use of petroleum based products as well as the increase in Chinese import taxes.

All in all it's an important time for the hide trade as the major annual Hong Kong Leather Fair (APLF) is only weeks away (late March) and late February and early Mach is the normal time when retailers start to place orders for back to school and fall business and manufacturers in turn start to place blanket orders with their tanner suppliers. Further increases in steers as well as the cow complex look like they could be set for further increases in the near term if not beyond.

Not even considering the current slaughter situation, which we feel will be short lived, leather business is very good in most if not all parts of the consuming world. Leather is in the forefront of fashion in automobiles, furniture footwear and accessories and at all price points. By the same token, world hide supply does not seem to have expanded as fast as demand has of late.

This leads us to believe that current levels, if not somewhat higher, are here to stay for a while. This situation should last the current leather season which will start to slow down at the time of the APLF in Hong Kong at the end of March.

At around the same time some of the Chinese permits should start to run out, slaughter should increase and the majority of large volume seasonal leather orders begin to slow. Bottom line: demand should exceed supply into April if not a little beyond which should keep prices on a very firm footing for at least the next six weeks or so.

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