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United States procurement season hit by uncertainty

Published: 20 Nov, 2018

The autumn procurement season, which finds in the months of October and November its busiest time is quickly heading towards its end. Uncertainty about the future of U.S.-China trade relations has weighed negatively on demand, adding to the difficult situation on the footwear front and, more recently, to the headwinds perceived in the automotive destination. In particular, the upholstery furniture destination seems the most affected. The perspective of a tariff hike on Chinese made goods from the current 10% to 25% from January 1 has changed producers’ calculations on how much leather they will need, as exports are expected to drop.

Echoing the situation in Germany, where the latest problems with heavy hides are specifically related to the automotive sector, the whole hides which find use in upholstery have seen things turn for the worse, as reflected in the latest prices. Heavy native steers, which withstood the downward pressure much better than other selections for a long time, were confirmed as late as yesterday to be in a poor shape, with sales done at a couple of dollars lower than just a week ago. This brings the drop of their value to about US$7-8/hide from early September or 12-13% of their value.

While leather footwear figures and outlook remain negative, their exclusion from the tariff war was a welcome development which prevented even worse scenarios. Despite these comments, there are rumours of recent volume sales, in which special prices were offered to large Asian tanners in order to clinch deals and shift stock. While we cannot vouch for their accuracy, this would not be surprising in the current circumstances.

The price of cowhides appears to have stabilised around the values reached a month ago, after September had brought some downward adjustments. But the news out of China, where the long-running crackdown on polluting tanneries is still real, holds their current situation in a delicate balance. Click here to read more.

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