German Perspective—27.07.10 - leatherbiz: Lea Leatherbiz

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German Perspective—27.07.10

27/07/2010
What happened this week: It’s very clear that we are heading towards the peak holiday season. Clients and suppliers have already or are starting to pack up for their summer vacations. Those who live in northern Europe have already enjoyed a very nice and hot July and that was already something like a ‘warm-up’ for the real vacation. Farmers are less happy with the weather conditions so far, but there is always something wrong for them. The extreme heat and dry conditions continue to weigh on the weekly slaughter and in combination with the holiday season in the slaughterhouses the income from hides is in pretty painful small quantities. Market activity remains also in holiday mood in Europe while interest from Asia perked up this week. At the moment there is not a clear trend. While the US reports are talking about very quiet export activity we had better demand and a few weeks ago it was the opposite. However, better demand doesn’t mean better prices and with the US dollar now oscillating around the $1.30 mark to the euro instead of $1.20 some weeks ago, there is 7% missing from export calculations since prices in US dollars haven’t moved up again. Consequently we have a market situation that cannot make anyone really happy. Clients think they are paying too much and we know it is too little. Too little because the levels reached at the abattoirs are not obtainable in the marketplace any more. Over the summer the market is also missing any real driver with the European industry being on holiday and final plans and decisions from retailers in most cases still pending.

From the various segments of the leather market, the signals remain pretty much the same. All polls and company information are signalling full optimism for the next retail season. This is certainly good news, but we should not forget that it is already history in the manufacturing pipeline.

We had two situations of great importance that had a strong impact on market developments in the past year or so. The crisis of 2008 caused a major de-stocking in the pipeline and the cold winter of 2009–2010 in the Northern hemisphere cleared stocks (even elder ones) in retail and wholesale nicely. This has had laid the foundation for the strong performance of the raw material market and manufacturing since summer 2009. In automotive the luxury market segment has been boosted by the strong performance of export markets. Any slowdown will most likely not be compensated by a market boost in the traditional markets and so this segment has had an excellent recovery, far stronger than anyone had anticipated. This too led to a lot of re-filling of the pipeline, but even when present order books are well filled it is absolutely not certain that the pace and speed of the automobile market can be maintained into 2011.

From the upholstery market, the news is far less promising. In particular from China a lot of tanners are reporting poor order books and a number are even thinking of temporary shut-downs or laying off shifts.

Trading this week was reasonably active and interest was across the board of markets and hide types. It seems that a number of tanners prefer to stay with smaller volumes in the market instead of betting fully on a declining raw material market in the near future. In particular the Asian tanners have to take decisions in July if their inventory positions doesn’t allow them to wait and see how the market develops after the summer holidays. Prices were about steady, but still not sufficient.

The kill: The kill during the week was a little bit better, but still far below normal levels, even considering the season. We hope that in the next two weeks the lows will be behind us and numbers recover.

What we expect: We expect that the next one or two weeks will be the lowest levels of the summer activity. With empty warehouses a low kill and the industry being in peak vacation time only the Asians can keep us busy. However, the limited supply and stocks will keep market activity under tight control no matter what the interest is from the industry.
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 € 1,90 Steady
  25/29,5 kg 27,5/28,5 kg 22/27 kg 25/26 kg € 1,75 Steady

Dairy cows

15/24,5 kg

22,5/23,5 kg

13/22 kg

20/21 kg

€ 1,70

Weakish
 

25/29,5 kg

27,5/28,5 kg

22/27 kg

25/26 kg

€ 1,45

Weakish
 

30/+      kg

33,5/35,5 kg

27/+   kg

29/31 kg

€ 1,30

Weakish
Bulls 25/29,5 kg 27,5/28,5 kg 22/ 27 kg 25/26 kg € 2,00
 Pressure
  30/39,5 kg 36,0/37,0 kg 24/34 kg 31/33 kg € 1,90
 Pressure
  40/+      kg 45,0/48,0 kg 34/+   kg 38/40 kg € 1,70
 Steady
Thirds 15/+      kg 25,0/27,5 kg 13/+   kg 24/26 kg € 1.10
 Weaker
Thirds bulls 30/+      kg 38,0/40,0 kg 24/+   kg 33/36 kg € 1.20
 Pressure


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