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China - Strong domestic demand

Published: 09 Oct, 2020

The demand for finished leather continues to be almost exclusively from the domestic trade. The upholstery side of the finished leather business is reported to be very buoyant, although there are now signs that customers are becoming resistant to further price rises, so maybe the ceiling has been found, or is very close to being found. Further good news on the domestic front is the reported increase in demand for leather bags, belts and other small leather goods. This is a segment of the industry that had dragged well behind upholstery, but now is starting to show signs of growth. The shoe upper leather tanners report that there has been some uplift in demand, but the market remains very price sensitive, with customers rebuffing any attempts to increase prices. There are reports that tanneries with large inventories of cured hides have been able to wet-blue (tan) some of their stocks and sell as tanned material, therefore taking advantage of the rising hide prices, although tanners are aware that they can only tan those hides they do not need for their own production, or they will face replacing the cured hides at higher values. The domestic automotive industry remains strong with more vehicles being reported to contain leather than before, presumably because it is now seen as cost competitive and value-added compared with manmade materials. However, for the fourth quarter of 2020 and into the first quarter of 2021, tanners are displaying a side of caution, as it is expected that there may be a slowdown in demand, with finished leather buyers reporting to be holding large stock levels, which will need to be worked through. Officially, it is a national holiday until Thursday of this week (October 8), but in reality, many tanners are reported to still be working on the input side. Buyers seem to have taken the week to access the market, in a hope of dampening ever rising prices. Those tanneries in the Hebei Province are reported to be completely shut for the holiday period, while environmental agencies carry out an audit and control of the recent pollution problems. The overall manufacturing sector in China was slightly up for September when compared with the August figures, although naturally still well below the 2019 levels.

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