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China – Production back in near full swing

Published: 18 Mar, 2020

It seems that things have started to go full circle with China now starting to return to production as death and infection rates are falling. If the same pattern is to be repeated then maybe the rest of the world has another month or so before the same catch time can be reached. Spring can-not come fast enough, with reports that warmer weather will slow the virus march. All tanneries in China are now back at work, however the operation levels are reported to be between 50-70%. Most tanneries are utilising their inventory levels for this current production, but these stocks are at much higher levels than the present market levels, meaning that tanners are looking to purchase new inventories at much lower price levels in order to average down their costs. Most tanneries are experiencing cash flow problems with shoe upper tanneries reported to be at the greatest risk, due to the fact that the finished leather manufactures have not started to fully operate, so are unable to clear their outstanding debts. Each week that passes now the problems ease, but the big question is when will shoe and small leather goods factories re-open? These remain closed for new production due to the dramatic down-turn in the domestic economy, as has been said before buying a new handbag will not be close to the top of the shopping lists.
All eyes are now on Europe and in particular Italy, not only the major tannery production centre of Europe but also the epicentre of the Virus for that part of the world, with the country now placed into lock-down to try and contain the virus from spreading. As one commentator reports, the thing that is for sure is, unless it is a niche weight or quality then tanners expect to be paying a lot less for any raw or wet-blue hides purchased in the short to medium term.
Inflation has been given for February as 5.2%, which is down from 5.4% in January, Automotive sales fell year on year by 78.5% in February with the revised forecasts for 2020 now expecting a decline of 8% over 2019.

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