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April/May 2012
[Published 24 April 2012]
Volume 25, Number 2
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Beast to Beauty: Jean Paul Gaultier
The value of component brands
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Roughing machines make life smoother
The game changes for Wolverine Worldwide
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TUESDAY, JANUARY 10 2012
MARKET INTELLIGENCE – 10.01.12
Macroeconomics
First of all we would like to wish all our
readers and friends a very Happy New Year
and a lucky hand to manage the challenges
of the year ahead!We had a long break since our last issue
and whoever thought that we could start the
New Year with a clearer situation on the
financial markets, or more stability, was
unfortunately wrong. Yes, it has been a bit
quieter in the last few weeks, but this is rather
owed to the season than to stabilisation in the
(EU) markets. 2012 will be a year of elections
in many countries in the world and this has
also proved to be a difficult time in the past.
The EU debt crisis continues to dominate
the market activities and the headlines in the
financial media. Greece doesn’t make any
progress in managing its debt crisis; Spain had
to inform the public that its targets to reduce
debts were missed. Just Italy was able to get
cheaper money, but the next few weeks with
a lot of new refinancing needs of EU countries
will show us what the market really thinks.While the EU crisis remains in focus, issues
with debt in other countries are also starting
to be a concern. Namely the debt in Japan
and the USA are causing concerns and it is
openly discussed whether those debts could
ever be repaid and how the budgets could
ever be brought back into balance.Consumers are reacting in different ways. In
countries which are hit hardest from the crisis
(Greece for example) consumption has
collapsed, but in many other regions the
consumer has decided to spend. In the
expectation that governments will (as usual)
eventually not see any other option than to
increase taxes on income and wealth, they
would rather spend their money than save it.
With the option of seeing their money either
taxed or losing its value, they have decided to
please themselves instead of keeping it in
such uncertain times. That was good for retail
business and strong season shopping, but
proves how scared the public is even in better
performing countries.In general we would say that the situation
isn’t good, but still much better than the
general portrayal in the media. Media and
governments are falling over each other to
predict difficult times or even catastrophes,
but the private sector is much more relaxed
about the situation. This might be fatalism or
better knowledge, but experience indicated
that the public sector hasn’t been able to
manage the situation in the past, so it might
not be able to do so in the future. One is
better advised to take care of his own matters
rather than hope for the politicians to handle
it. Governments in Europe don’t like to hear
that, being busy castrating civil rights and
private responsibilities with the argument of
the crisis. This is obviously backed by those
who depend on the state anyway, but a fatal
trend however.A bit in the background are the tensions
between Iran and the rest of the world, which
has made oil prices sharply rise again. The end
of the war in Libya was supposed to restore
more oil supply and ease prices, but the threat
to close the street of Hormuz and an oil
embargo on Iran has lifted prices sharply again.This leads to a look at general commodity
prices and they have stopped their descent
and stabilised or turned around in general.
Despite the negative news businesses in
general have started to moderate their
outlook and many realize, that more than 7
billion people have to cover their basic needs
despite the big game played on the financial
markets and its uncertain outcome.The EURO slowed its descent and continues
to oscillate around the $1.30 mark. The
sentiment for the currency remains entirely
pessimistic. Rising oil (commodity prices) and
a weak EURO will have a negative effect on
the economy eventually with the cost of
living, mobility and comfort rising. Fortunately
it was a warm winter so far.
Market intelligenceThe moderate market option we had
described in the last issue in mid-December
turned out to be the right one. A combination
of some replenishment buying from Asia and
sharply declining slaughter allowed the
market to settle and some were even trying
to paint a rosy picture with a firmer tone.To call the market firmer is definitely a bit
of a selling strategy rather than describing the
facts. The market certainly bottomed towards
the end of December and the decline has
come to a hold, but to call it firmer just when
prices are consolidating on a lower level and
settling in a wider range of prices is too
optimistic yet. Just because some having sold
a bit too cheap and then getting a fraction
more to return to market levels doesn’t make
a market firm.However, the bargain hunting time of the
Asian tanners to replenish some of their (low)
stocks and to secure raw material for their
production after the Chinese New Year break
has created much more confidence on the
supplier side and the low kill in many regions
added to their positions. All the sellers who
had been willing and able to reach in the
weeks during the season reported good and
healthy interest. European sellers also got
support from the currency situation and
overseas exports were their Christmas present
after the EU markets proved to be pretty dull
since beginning of December.
Also US suppliers were finally seeing a light
at the end of the tunnel and the big packer
raw material market also steadied or went up
a fraction. A big question mark remains
behind the wetblue stocks still being reported
from this part of the world. Despite all calming
statements from the main producers one has
still got the odd feeling that the positions are
simply not cleared yet. Apart from tanners just
basing their productions on semi-finished
material, wetblue sales always need extra
demand to justify the extra costs and to satisfy
short term or speculative interest or demand.
None of the latter we can trace at this stage
and it might need a further uptick in demand
or a longer period of lower kills to get wetblue
medium or higher priced wetblue hides back
into play.Some of the ‘odd and old’ stocks which
were sitting in EU warehouses since the
summer, however, seem to be cleared now.
There are rumours about some Chinese
import traders travelling in Europe before
Christmas, checking and negotiating on these
stocks. At the beginning there were some
good bargains to be made, but when sellers
realised that there was enough serious interest
around, they got more confident about their
position and cleared the remaining positions
at close or even on market levels. They were
also helped by the regular suppliers who were
decently cleaned up and not willing to extend
position any further.
Fundamentally this has created a solid
bottom to the market and a lot of the market
concerns have now faded.The raw material and in particular the hide
market react traditionally to sensible and
volatile conditions. Sellers traditionally prefer
a firmer hide market and while most of the
global market control has shifted towards the
butchers, this has become even more
emphasised in the recent past. Consequently
the consolidation and the outlook for lower
kills have already turned the sentiment of
many raw material suppliers from ‘fear to
greed’ again.Starting a new year it might be worth
having a look at how justified and realistic
such a sentiment is.
The key question is whether any other
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Tannery of the Year, The Awards Book 2011 (In English): £30, €35, $50
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