Part of the understanding of the Chinese fur industry in 2021
The 2021 Market Review.
Between 2021, the fur market was highly fluctuating, the volume of trade and prices were deeply affected by the decline in production, the epidemic and the economic situation of China.
At the very beginning of this year, because of the breaking news of production reduction in Europe 2020, the speculators’ expectation of the prices escalated, and they kept pushing the skin prices up and up, till the peak in June. But those expectations were not very strong, because those high prices cannot be passed on to fur producers and clients. Coat producers didn’t have the confidence of passing those prices to customers, they know that fur coats now in China are not the luxury any more, buyers today are very pricey-sensitive, so they would like to use the strategy of “waiting and see”, they buy the skins only when they have got the concreted orders from the retailers. But the fur coat market turned out very weak this year, so the skins are still kept in the hand of speculators, the speculators can’t sell their skins, therefore, no sufficient funds available to purchase new skins in following Auctions, so, the trade volume in the following auctions was less and less consequently.
Some of the speculators used very heavy leverage to finance their purchasing this year, now they are under big pressure to pay back.
The total sales of fur coats this year was less than 50% of the sales in the year 2020. In 2021, the Chinese domestic retail market was hit hard by COVID-19. China has adopted the zero-tolerance quarantine policy, some people, who may have the possibility of being affected, should be quarantined immediately, which makes people much less willing to go out, shopping malls are not their most wanted places to go, that hurt the sales.
The weak performance of fur coat selling was not only because of the epidemic, but also China’ weak consumer confidence. This year, China economic policy is mainly about economic structure updating, that updating has made the economy lose its speed, many businesses, such as real-estate, off-school education, online retailing and entertainment were shrinking, many small and medium businesses went bankrupt, more and more people got unemployed, China does not have a very solid social welfare system, in that case, as the reaction to the current economic situation, people are not very willing to spend money as they used to be.
the summary of the reasons for the weak sale of the fur coats
- Prices were much higher than in 2020, consumers and coat producers can’t digest the prices quickly.
- Epidemic blocked the sales
- China economy is slowing down
Some Understandings of 2022 fur Market
The skins prices right now are extremely unstable and the market is short of liquidity. Currently, the prices are between the price level of 2020 Sep and 2021 Feb. In the year 2020, with this level of prices, garment producers have produced a big number of garments and have them sold successfully, so if we assumed that Chinese consumers can accept those prices, it will mean that the current skins inventory can be consumed next year eventually. That will leave room for the new skins.
Recently, China began to loosen the monetary policy, the bank reserve rate was cut down, the interest rate was cut down today too, more money and fiscal easing policy will be adopted by the government, to stabilize the economy, and strengthen the consumer confidence.
Epidemic effects, Chinese so far have injected 2.68 billion vaccines (2 or 3 injections each person), so hopefully, the epidemic can be controlled in China next year.
http://www.nhc.gov.cn/jkj/s7915/202112/9b0efe79ee6b4b8286c5e745541c8b2e.shtml
In general, the demand for fur skins is still in China, which can be proved by the good performance of fur coat sales in 2020, demanding can’t disappear totally in such a short period. But next year, the skins, sales will still be affected by the China economic structure changing, epidemic situation, and of course the dynamic price expectation, therefore the total market volume can be shrunk, under this kind of situation. Some skins producers, speculators and garment producers will out of business, but that will leave the room for good health business participants, and the profits after.
In that case, a conservative investment strategy, keeping strong cash flow, cost control, diversified sales channel should be considered for every skin and garment producer.