Great expectations

ILM Editorial comment - Martin Ricker
Published:  17 August, 2016
Martin Ricker

A lot rests of the amount of business that will be carried out as a result of the upcoming trade fairs in Shanghai followed by Paris and Milan this September. With maybe the exception of the automotive upholstery segment leather consumption is down across all the other major segments. For many tanners there is a lot riding on the next buying season after a difficult 2015-16 period.

As I’ve mentioned some time ago, the fall-out from record high raw materials prices in 2014 and early 2015 has allowed other materials in through the door and some brands now specify less leather as part of their materials mix as a consequence. But this is only part of the story why the market in general has been weak for the past 3-4 seasons.

When you also consider a number of ongoing geopolitical events, fear from international terrorism, changing fashion tastes, weakening BRIC and other markets, and the changing consumption patterns of Chinese consumers then we see a complex picture which makes predicting future leather consumption difficult.

Since the record price highs of late 2014/early 2015 thankfully raw materials prices have steadily declined especially in the small skins segments and consequently the costs of making semi-processed or finished leather is now more competitive against often fossil fuel based synthetics and other competing materials.

theSauerReport, ILM’s sister service which monitors prices and trends in the raw materials market on a daily basis has seen some slowing of the decline hides and skins prices in general and there is now a degree of stability. At current price points for many raw materials selections it’s probably a good market for tanners to buy. But that of course depends on customer orders on the other side.

The Sauer Indexes

theSauerReport publishes four indexes covering a basket of raw materials and origins weighted to represent their volumes in the freely traded markets of the world. The latest data sets gives us a glimpse of the current market which is now fairly stable. There is a premium for higher grades and/or heavier weights reflecting demand from automotive and very top-end leather goods.

In general, prices across most raw materials types have stabilised according to the latest Sauer Index data. For goatskins there has been virtually no change in prices than those reported in July. Perhaps more interesting is that the Sauer Index for sheep and lambskins shows its first points increase since a slight jump was witnessed in February 2015. Further examination of the index shows that sheep and lambskin prices have declined steadily since January 2014 when index was around 180 points. To put this into some kind of context the latest data shows the sheep index closer to 92 points. Despite the slight overall upturn in prices, sheep and lambskins still languish at a very low point which is best seen in the longer timeframe indexes.

For the two bovine indexes representing hides (excl. calfskins) and the bespoke upholstery hide indices there has been some movement. Recent falls in U.S. hide prices has generally tipped the balance towards a dip in the overall hide index, despite a number of other countries showing more stability. In the U.S. it is the steers that have fallen furthest recently, whereas cow hide prices have remained steady following heavier price falls earlier in the year.

In spite of falling U.S. Steer prices which includes heavy native, heavy Texas, Colorados, branded and butt branded selections, the firming up in other origins, particularly in Europe, has brought the index back to levels seen in June. Although there are some indications that the global automotive market is slowing slightly, demand for automotive leather and the heavier ox/bull hides remains, at least for the time being. Lower U.S. hide prices often start a domino effect with other origin countries. We wait to see if prices will begin to reduce in the coming weeks or whether there will be an upturn in fortunes this Autumn following the upcoming trade fairs.

Martin Ricker, Content Director

martin@internationalleathermaker.com

To find out more about theSauerReport watch this video:

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