Sharp declines feared

Published in September 09

Published: 18 November, 2009

The interest in hides from China has continued right through the summer with demand across the whole weight spectrum. A huge demand for 46kg+ has also been seen which is surprising as this is a weight of hides not normally sold in China in large numbers. This has caused prices to move on sharply again and as always with such steep increases in hide prices there is the fear that sharp declines could be just around the corner.

There has been a financial stimulus from the Chinese government designed to stimulate domestic demand for Chinese production to replace the reduced demand from the export market. This has resulted in an annual increase of 48% in Chinese automotive production in June 2009.
Property in China is booming while the rest of the world sees the property slump continuing. Also while stock markets in the west have recovered somewhat the Chinese stock market has soared. Furthermore the Chinese government expects loan book positions in the banks to fall 50% by year end. In essence we have seen a surge in demand from just one market albeit the largest market in the world. Other markets have been forced to follow the prices if they want hides but there is a marked reluctance to pay the higher prices.
The fair in Shanghai will be very interesting. It occurs just as the kill, in Europe, starts to increase putting larger numbers of hides onto the market. It is also the time when European tanners return from the summer vacations and see just how the US$ has weakened over the summer, reducing the returns on their uncovered positions.
The feeling is that this surge in the market is unsustainable and the Chinese will revert to form and walk away from contracts if the market starts to slide. The rapid rise in prices may be followed by a rapid slump. We are in unchartered waters and nervousness abounds amongst sellers.
36kg+    58p ($0.95)
31/35.5    68p ($1.11)
26/30.5    72p ($1.18)
Cows £15.50 ($23.20).
The doubleface market continued to decline with Irish skins falling 30p to £2.90 ($4.75) and English skins hard to sell. It looks as if skins will be sold on the run by the end of August at fellmongering prices. The skin trade remains under pressure.

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