Satisfactory clearance percentage
7 March 2014Auction
The clearance percentage following the February auction is approximately 14 percent lower compared to last year. Last year the clearance percentage was 64 percent, and this year it is roughly 50 percent. But since Kopenhagen Fur has given buyers an extra month of interest free credit, one month from now, there is good reason to expect that the clearance percentage will surpass the 64 % - it will simply happen one month later than usual.
- At this stage the clearance percentage is slightly lower compared to last year. We do, however, expect that it will accelerate and increase slightly over the weekend, says Kåre Alfsen, Financial Director at Kopenhagen Fur.
He also says that the interest free credit that the auction house has offered to the buyers has stimulated their willingness to buy skins.
Not appealing for speculators
- We can see that the extended credit has influenced the buyers' willingness to buy products. In addition to that we have an extra long credit period, which ends April 7. This is also being used by our buyers; they are spending the extra time to store their purchased skins here at Kopenhagen Fur. That means that they do not have to pay for storage while they are waiting to have their skins tanned at their preferred tannery.
- We have also noticed that the prices are not low enough to be appealing to speculators. Prices may not be as high as last season, but the fact that the prices are not suited for speculation shows me that we are dealing with a price determined by the market, Kåre Alfsen says.
Kopenhagen Fur has made sure that the buyers were able to get credit in advance of the prompt day. For this purpose the auction house borrowed 1 billion DKK. From this total sum, it is expected that less than half of the credit will be used. It is important to add to these numbers that Kopenhagen Fur generated sales for 2.6 billion during the February auction.
Kåre Alfsen is convinced that the extra credit period has been a success and the right decision.
- In spite of NAFA's reduction in skins for sale, there is a large amount of skins hitting the market these days. So by extending the credit period we give our buyers some flexibility, and they can retrieve exactly the products that they need in their production when they need them.
Low clearance percentage not likely to affect next auction
Normally a low clearance percentage equals a low demand. But during this season there is much to indicate a new rulebook.
- The fact that the clearance percentage is 14 percent lower compared to last year is likely caused by our customers thinking: `Just in time´. They redeem a specific product when their preferred tannery can accommodate them, says Kåre Alfsen.