News

Price Turbulence Reduces Consumption

Time:2018-12-11 Source:ISU Secretariat

 

Mr. Paolo De Ponti

General manager of Raw Silk and Yarns, Trudel Limited

 

 

It is too easy for me to remind the ladies and gentlemen here, almost all of a certain age, how the sudden rise of the silk price occurred in 1989 then led to the collapse of the same culminated with the historical fall in 1993. At that time the current price, controlled by CNSI&EC, was 36USD/Kg. flew on the free market abundantly above 60 USD /kg, and then collapsed a few years later, (just during the last ISA congress here in Como) until 12USD. /Kg.

Some of you may think that i want to make risky parallels with the current situation, no, the current situation is profoundly different (except perhaps for the congress), today we are in the modern era, in the age of the global world, in the age of internet.

Look, this is what scares me the virtual market. Our market is a real commodity market, made up of farmers, farmers who work the land and then develop a production that involves people who perform a difficult and complicated work based on knowledge, tradition and experience gained in years of absolute dedication. There is nothing virtual, it is all true, concrete to the point that reeling machines are still almost totally mechanical today and modern technology is used only in some of the production phases that lead to the finished product.

But let's go back to the silk market. Where is today the market of the net that last year made the silk price rise up to bring it over 85USD/ Kg, from 50USD/ Kg. where we started a couple of years ago? And why a sensitive reduction is happening now in a very short time, as happened in a few years in the early 90s? You will therefore agree with me that some analogies with the past may exist, regardless of whether the circumstances and motivations of today are different.

In high-income countries, silk is considered to be a luxury item but now an old and often superfluous product. In countries with strong economic growth, silk is considered as real voluptuous goods and consequently with an extremely price sensitive demand for medium and low income buyers.

The european market is certainly influenced by the absolute high price to the point that some medium-low end brands have in recent years completely abandoned silk the fast fashion market is very dynamic and the strategy is to bring new products quickly to the stores because they are oriented to young consumers interested in low-priced products; a vision that is incompatible with today's silk prices.

But more than any other factor the silk market today is terribly suffering from price turbulence. High-end brands in fact need time to plan and then to produce high-quality products, they have to cope with previsional risks, project risks and industrial risks and consequently they need stable prices for at least 8-12 months; since their times do not allow them to follow the quick fluctuations of the silk market European importers and processors of raw materials that have always played a calming effect on silk market peaks, are not able to carry out this task if the situation becomes uncontrollable as in the last year. At last even middle-upper consumers tend to abandon silk.

The hope is that in the future prices may be more stable with the help of all the operators who must try not to be attracted by the easy profits of short term speculation and not to get caught up in the frenzy of the downturns.

To conclude, having been too concrete talking about prices, let me make a final consideration more 'learned. I would like to recommend my European colleagues to treat the ups and downs of silk prices as the triumphs and disasters of Kiplings memory: two impostors.

With regard to the excesses caused by the virtual market of the network, i would like to make a consideration with our Chinese friends. i have recently read that in Chengdu aerospace station they built an artificial, virtual moon, made up of a large space mirror launched in orbit, in order to reduce the costs of night lighting. I wondered if the great Chinese poet Li Bai would have been happy to always toast without waiting for the moon phases or if he would lose his brilliant inspiration scaring himself to see two moons before getting drunk.