Business shifts to China

17 November 2009

Hong Kong was fascinating this year as for the first time in the writer’s experience the bulk of the volume of business from Ireland has shifted from Europe to China. One Scandanavian seller stated that although he had felt that for many years his business would gravitate to China, this was the first year that it had actually happened. Indeed, he said that in previous years his business had been 80/20 Europe/China, this year it had switched to 80/20 China/Europe.

Thus has our business changed and our approach to it must also change. There is a definite difference in the way that business is done in China versus Europe. While we all know how the Italian tanners work with their claim culture we all learned to work within their system. The Chinese are quite different. A contract is not a contract until the letter of credit is opened. If you are enough of a gambler in that you accept a deposit along with the balance of the monies due upon arrival then you are in very dangerous territory altogether. If there is any doubt in anyone’s mind about this, just ask around and it will become obvious just how many people were caught before and after Christmas.
Since then the credit insurance cover on Italian tanners has been falling and, therefore, European sellers  have to learn to live with the new realities in the market place.
In April there has been some interest from the better Italian tanners as they have bought to cover orders. With the smaller kill this has resulted in slightly firmer prices. However, currency fluctuations can either wipe them out or improve the returns depending which day you opt to cover your exposure.
Many shippers have experienced another problem in the last couple of months that did not become apparent until the damage was done. The shipping lines decided to operate a policy of overbooking their ships, just like the airlines do, and then containers were left for weeks on quaysides in Europe before being shipped on. This meant that customers who had opened LCs, or who had paid in advance, had to wait 8 weeks for delivery rather than the five weeks promised. The shipping companies did not tell their freight fowarding agencies about this so no one knew what was happening until it was too late. The shipping companies have promised that this will not happen again but in the meantime sellers have been left with very unhappy customers.
Prices edged slightly higher and were as follows.
36kg+    42p ($0.60)
31/35.5    46p ($0.66)
26/30.5    52p ($0.74)
Cows £13 ($18.59).
The old season hogget kill continued pretty much as before in terms of animals killed but prices did fall back on the back of lower demand. There is still no market for new season lambs as there are insufficient numbers to make a load yet.

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