March 2011
Since last writing a market report in December the market has become even more difficult for a myriad of reasons, some were expected and others could not been foreseen.
The fact that much of the Middle East is in varying stages of trying to bring about regime change, the consequent great political uncertainty, and the resulting steep rise in the price of oil has only served to add “fuel to the fire” if you will excuse the pun.
The natural disasters in Japan and New Zealand, that no one could have predicted, will also have huge effects on the world economy.
China’s economy, vital in avoiding a worldwide recession, still seems to be powering on which has significant implications on the bristle market.
The RMB continues to strengthen against the US$ which is no great surprise, however the rate at which costs are rising in China, largely brought about by the strength of the economy, are certainly steeper than many had expected.
Bristle dressing factories are finding it very difficult to keep and/or recruit workers-the amount of building taking place remains staggering in China-this is not just confined to the coastal regions but is also booming in land. The majority of bristle dressing factories are located in fairly rural regions in China, precisely the places that are now seen as more attractive places for companies to build new factories, to enjoy relatively “cheap” labor compared to the more industrialized areas such as Shanghai/Guangzhou/Jiangsu/Beijing etc.
This is in fact a double whammy-a massively increased demand in the building sector, for unskilled labor, and the new jobs being created by companies moving into the rural areas where traditionally the dressing factories had almost a monopoly on employment.
New raw material is becoming available after the Spring Festival but there is no sign of prices stabilizing yet. The fact that there is still very healthy demand from domestic brush manufacturers in China serves to under pin the market and the fact that there is not too much bristle in stock in China or little if any which is unsold in Europe leads me to believe that prices are unlikely to fall any time soon.
We would therefore recommend that manufacturers continue to hold healthy stocks and plan well forward – for those of you manufacturing in Europe you at least have the benefit of a significantly stronger Euro which has taken some of the pain out of recent price increases, but with the structural deficits in countries such as Portugal, which are very much in the public eye at the moment, it is anybody’s guess how long this will last.
by Tim Kleingeld
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