German Perspective - 25.8.15
What happened this week: Many are beginning to pack for the trip to Asia and some have already departed. Everyone is now awaiting the results from the trips, meetings and from the fair (All China Leather Exhibition, August 31 to September 2) then many will head to Milan for Lineapelle (September 9 to 11).
The leather industry will be busy either exhibiting or visiting their clients and trying to attract interest for the desperately needed orders for the coming season.
The general global conditions are deteriorating. The sanctions against Russia, the slowdown of the economy in China and the falling oil prices are working against the leather business.
However, it seems the raw material markets for hides and skins are running ahead of schedule and we had the correction well in advance. Hide and skins prices came down well ahead of the deteriorating global economy and confirmed their reliable indicator function.
In the meantime, the market for better-quality raw materials has stabilised and some are trying to push prices higher – which in our opinion might be a reasonable strategic move, but might be somewhat premature.
However, several tanners needed to replenish their pipeline and considered the special offers during the past weeks as a good opportunity to reduce raw material cost, particularly those from Asia.
From the sellers’ point of view, this was appreciated and the timing before the shows was useful, because it makes the face-to-face meetings with those clients easier. It looks however, that the stabilising conditions are not widespread.
The low end sector is still suffering and the situation for splits, sheepskins and low grades has not shown any improvement. Fortunately this affects only a small part of the business, but it shows that things are not really better across the board. A lot will depend on the economy on China which will have a big impact on many regions and their economies.
On the positive side we can hope the substantially lower energy costs will increase purchasing power, at least in the importing countries.
Sales this week were nothing special. In Europe one could place some males and a few containers of cows found their homes in Asia. However, it was hard work and the falling value of the USD made it impossible to maintain euro revenues this week. Those who been hoping also for a rebound in prices in Europe were disappointed.
The kill: The kill is steady on the lower levels which we reached over the holiday period and everyone is now waiting for the holiday season to end. Many expect the low milk prices to have a strong impact on cow slaughter for the rest of the year. However, the beef has to be sold too and beef isn't in fashion.
What we expect: It will be not so easy to get a clear picture next week. Many sellers are travelling and we would not be surprised if buyers and sellers conduct business before the fair in Shanghai. Whether that is a lot or little, we are not sure, because there is no clear indication for leather demand and prices. Generally we remain very cautious.
