Extracts from the Sauer report

Worldwide there is more demand for lighter hide types. According to official statistics heifers and their calves in the USA are 7% less this year than in January 2004. This could lead to firmer prices for heifer hides in the USA (hardly any offers around at present) but also in other countries.

There were no surprises at the Cologne furniture fair, the second most important furniture trade fair in the world (after High Point in the USA). Top qualities will always find buyers but numbers are small and mean little to the global industry. The cheapest types also move well but, almost as per tradition in recent years, everything in between is in trouble.

Raw material market reports continue to write about small stocks with the world's tanners, usually followed by the remark 'thus they must soon buy'. But do the world's tanners want to have big stocks? It seems out of fashion as has been the case for many finished products for a long time (shoes for instance).

More and more tanners only buy for their immediate needs and for immediate shipments. When work was sure and plenty and money to finance raw stocks easily available it was no problem to fill up a warehouse when prices seemed attractive. This is no longer the case.

Nobody wants stocks if they do not need them. Not even when prices are low because you still have to pay for the goods. Hence the statement 'tanners have low inventories and thus must buy' may no longer be valid. Today, tanners do not buy when they have small inventories but when they have orders.

While Taiwan shows less tanning activity, there is more movement in Korea. The increased number of bids and sometimes better prices for American hides originate in that country mostly.

Bigger and better Bakrid festival skins coming in now in India are bringing better prices.

For Kenya, there is new demand from India for large size garment goatskins. Cattle hides still trade at a low level due to a big gap between buyers and sellers price ideas. There is good, steady demand for sheep.

In Nigeria, the big festival kill has finished and traders and tanners are now fighting over who gets these huge quantities of good quality skins. It is supposed that about one third of the 'Salah' production will be of the superior quality everybody wants and for which there is always a market against no more than about 10% during the rest of the year.

There has been no activity in Muslim countries due to El Eid festivities. In Saudi Arabia, for instance, there has been a total lack of new orders. Even the every day sheep and goatskins stopped selling this month. The interest from traditional buyers does not go any further than enquiring after prices. The total silence from China is particularly notable (but this could be due to Lunar new year holidays).

European tanners report most work for the summer season is finished pointing to the gap between seasons. The orders for winter will not be coming before April so what to do in February and March?

On a more positive note, UK brand Mulberry and French LVMH report better leathergoods sales.

A large quantity of Russian hides are reported to have arrived in Santa Croce, Italy, shortly after the new year. It is not clear whether these purchases were by tanners or traders.

In Spain and Italy, however, there are no signs of any clear improvement in orders for the new year yet.

In the Netherlands, the hide trade reports very little action and prices just slightly below November/December levels.

There have been no new directions in France. For hides, calf and lamb differences with previous price quotations are minimal.

In Portugal, only a few tanners are busy. All others are complaining about the lack of orders.

Spain experienced the special 'Kurbani' kill this week, as usual the better animals. This resulted not only in increased availability but also higher weights in the lambskins. Nappa skins, however, are a bit cheaper.

Spain also witnessed their traditional 'Pielespaña' event in Barcelona but the old and famous fair opened its doors for just over half the number of exhibitors of last year: 78 versus 130 in 2004. A sad happening but one that reflects the state of the industry.

In Greece, the smallest wet-blue lambs are 5 cents cheaper. Other sizes unchanged. Wet-blue goats were down 5 cents also.

Both hide and lambskin business was slow at steady prices in Croatia.

After earlier election problems in the Ukraine, the hide market came out a tiny bit firmer, more on cows than on ox/bull hides. Calfskin prices came down.

Brazil's Couromoda shoe fair was considered a success. Leather business is still slow while prices did not change and are still at mid December levels. A big supplier has reported higher wet-blue hide prices for the better grades. Low grades remain the same or even a bit lower.

Argentina has seen no change in prices but people believe they have bottomed and may pick up once tanners come back from their summer holidays.

For Mexico there has been more interest in sow skins but mostly for prompt shipments which are difficult to implement. Sow skin prices are consequently firmer.

Car sale prospects for the first quarter 2005 are down in the USA but also in China. In the USA tanners state that they count on a reduction of 7-10% in their business. Until now car sales in the US have not shown big changes and stood at about 16 million. In China, which produced 2.3 million passenger cars last year (and about the same in other vehicle types), major brands are proposing price reductions on car retail sales of up to 20% to boost business.

Changing policies are affecting the development of the leather industry in China. When it comes to upholstery hides, Chinese tanners' ideas do not top US$49-51 for European cowhides 25/28kg. For American HTS the figure tanners have in mind is still US$68 max. Today neither price seems high enough to buy them.

Visitors who returned from the Fur and Leather Products fair in China reported that more and more doubleface traders from Europe attend this event.

Tanning and furniture giant Zhejiang Kasen Industrial Corporation increased their furniture exports by 35% between January and December, 2004, to reach US$390 million. Zhu Kasen will again be speaking at next upholstery leather conference in Hong Kong on April 5, organised by Leather International and theSauerReport.

Ron Sauer

ronsauer@wanadoo.fr

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