German Perspective—08.09.09
08/09/2009
What happened this week: The show is over and the show must go on.
This week the eye of the hurricane of the hide business was Shanghai. The All China Leather Exhibition (ACLE) show was extremely well attended and stands were busy from the first day in the morning until the last day and some had actually even to be swept out of the halls, which is not really normal for these kinds of fairs these days.
A positive thinker will interpret this as a successful event and basically this is what is was. Thanks to China, the leather business today is much better than one could have expected and so the only problem, albeit a severe one, has been the sharp rise in raw material prices over the past two months. As usual the industry can hardly handle this. With prices rising too fast and from the beginning of the supply chain, this can hardly continue.
Chinese tanners are in a better position because they had the courage to buy cheap raw material in time and so their calculations are much safer and better today than those of many tanners in the rest of the world. However, it also has to be said that many are enjoying the fact that they did not burden themselves with expensive hides at the end of 2008. And so the recent steep rise in prices has given a number of suppliers the chance to pay back and to delay or renegotiate now cheaper contracts.
That kept a number of people already pretty busy, exchanging opinions about behaviours. A lot have understood now that it might be better to maintain a certain standard of behaviour until everyone forgets again.
A lot of new European exhibitors were seen at ACLE. After the strong performance of EU hides in Asia in the first half of 2009 and the poor state of many EU tanners today, many are seeking their fortune in the east. So a lot of new friends had to be made and many suppliers and clients got pretty excited about all the splendid opportunities. It may be next year before we see the results of this.
Meantime trading was normal. Demand for better quality hides remained good even with the higher prices and special grades got what was asked for. For the average stuff it was different, with tanners pretty confident that prices will correct themselves in the weeks to come. Dairy cows were the main problem and the lunatic prices paid at the abattoirs in August have gone far, far way from the real market levels. Sales were made at levels which are about 20% away from what the hides should cost.
However, a number were willing to bite the bullet and to pay the asking price, which is — depending on the supplier, the weight and the quality the buyers expect—from the mid 40s to the early 50s. A bit worrying is the fact, that most demand is for better quality hides only and a lot of tanners are sitting full of low-grade stocks. That doesn’t worry them today, because they look cheap, but one day they need to be moved. As long as the firmer trend persists no problem, but if the trend breaks it could become trouble again.
Until then they will just sit. In general there remains still a bit of a difference between the total global demand for leather and the mood people have. Export orders in China are still not were they should be and the domestic demand cannot compensate for all the hides produced globally. The high-quality end seems to be in a safe haven, but the lower end is, in our opinion, not yet in safe territory. With all the focus on China one should not forget that in the rest of the global tanning industry not all problems are resolved.
Split demand remains strong with rising prices, which is now helping tanners’ calculations a bit.
The kill: The kill is a bit better again. Numbers are stable at the moment, although weights are not yet were they should be. Meatworks are complaining that the beef business is not profitable, which may prevent them from increasing production. For the week to come we don’t expect any massive changes in production.
What we expect: Everybody has returned home and it will depend a lot on their final feelings about ACLE. If people are realistic, we have to expect further discussion about the cow market and the male selection to be steady as productions are mostly cleaned up. A lot will also depend on whether the bloodbath at the abattoirs continues; this will dictate their further actions on the market. In general it seems we have to expect a quiet week.
| Type | Weight range | Avg. green weight | Salted weight | Avg. weight salted | Price per kg green weight | Trend |
| Ox/heifers | 15/24,5 kg | 22,0/23,5 kg | 13/22 kg | 20/21 kg | € 1,45 | Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1,35 | Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1,30 |
Weakish |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1.10 |
Weakish |
|
|
30/+
kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,00 |
Weakish |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,40 | Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1,25 | Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1,10 | Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 0,50 | Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 0,60 | Steady |
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