RAW MATERIAL’S SIGNALS | A matter of strength

The United States close a challenging 2018, and start the new year with a new-found strength in Chinese demand (but for how long?). All the issues and challenges of a time-period that is hard to interpret, according to Francesco Matelli

Asian buyers have made large purchases in sight of Chinese New Year’s celebrations. The US raw material’s market for the tanning industry has started the year with vigour, thanks to “Asia’s comeback”, explains Francesco Matelli, trader with expertise in the North American market and owner of the company by the same name. Favouring the purchases from the People’s Republic was also the (slightly) better mood surrounding the relationship between Beijing and Washington, after a second half of 2018 in which tensions and trade disputes reigned freely. “The delay in placing duties and the attempt to lighten the negotiations have relaxed operators”, adds Matelli. Yet, one must consider that “Chinese tanners heavily rely on the US for raw material”, which is why the newly-found interest also motivated an “attempt to increase price”. More so, the bounce-back that we mentioned just now, is significant because the US market has had a period filled with tensions: “The United States were among the first to make concession on price – testifies the trader -, and closed 2018 in a position of weakness”. But, the USA have their reasons for feeling strong now, and aspire to a stable future”. First of all, because “for those that need “industrial-grade leather” that they can use in number and with a schedule, it is hard to find a replacement”, cites Matelli to further his hypothesis. And also, because with regards to certain “medium and medium-high quality” types, they are fairly economical. But it is impossible to find elements that will give a better outlook for the rest of the year when it is this early in 2019. “it is hard to make forecasts – admits the trader -, we can only look as far as we can see, also due to geopolitical and trade-equilibrium reasons, but most of all because there is not longer a “general market trend”, since every segment now has its own balance between demand and supply. Moreover, the traditional differences among different types, all tied, in the past, to a substitution logic with regards to raw material, no longer exist”. What does that mean? “because the tanning industry has to guarantee its clients qualitative specifications, with regards to the product, – continues Mr. Matelli -. This has created a lot of rigidity in any given type of leather for one specific article. Additionally, we noticed how the difference between Native selections and branded selections have increased, in the US market, since they used to be of just a few dollars in the past and are now between 10 and 15 USD”. There is no way to know what the future brings, operators just need to interpret how the market moves as it is happening.



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