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China – Currency woes add to the problems

Published: 25 May, 2022

The exchange rate with the US$ is the big talking point in China as it drags itself out of lockdown. Already if buyers buy at the same value, then in real terms, they are paying more because of the reduced value of the RMB against the US$. Some tanners have started to ask for renegotiations on older contracts that they were unable to cover before the financial district of Shanghai went into lockdown. So far there are no reports of sellers accepting this, with one major U.S. supplier at least reporting that price re-negotiations never go upwards with Chinese buyers.

With Shanghai opening and postal services allowed to recommence, it is hoped that some of the paperwork backlog built up can be freed, this will allow buyers to collect goods from ports in China and sellers to ship goods. Trading between tanners continues, with large amounts of stock being reported moving between tannery groups. 

The general feeling appears to be that new leather orders are slow in coming, and tanneries even when they reopen at processing hides at reduced capacities. Not until China fully reopens will the impact of the lockdowns become clear and the extent of the hit the economy and consumer confidence has taken. 

The view is that U.S. hide prices coming back has helped, but they will need to come back further to help with current finished leather prices and the falling local currency rate.

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