German Perspective—07.09.10 - leatherbiz: Lea Leatherbiz

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German Perspective—07.09.10

07/09/2010
What happened this week: The All China Leather Exhibition (ACLE) took place in Shanghai last week, closing its doors on Friday. The number of visitors, at least in the first two days, was very impressive and China remains the place in the world where one cannot feel in the least any crisis in private consumption. The city and the country are as active as ever and the progress made in building and modernising is more impressive every time you visit. The general mood during the show was fundamentally positive. There are not so many tanneries complaining about a lack of orders at the moment, although the general consensus remains that the production of leather is in most cases not profitable. A number of clients have been saying the same thing: the more they produce, the more they lose.

The situation is different in the various segments of the business and the hardest hit remain the producers of upholstery leather, but manufacturers of bag leather were far less excited than they were a year ago. These two sectors are the only ones mentioning that their order books are not sufficient and that the order level has dropped, by anywhere between 10% and 30% compared to last year. So they have displayed concerns not only about the volume of business in the coming season but also about the pressure from clients to lower prices. The big players in the shoe industry had nothing negative to say about their order books, but were complaining intensely about their margin situation. The only sector where one could sense what could be called an improving trend is in leather for garment production. It seems that the fashion for leather in garments is pushing demand. At the same time the production of skins is expected to decline due to the extreme weather conditions we have seen in many of the main producing countries. So those selling skins suitable for nappa production were the only ones who were able to gain moderately in their price levels during the ACLE fair. Skin types that had been reasonable in price rose moderately.

For cattle hides the situation is certainly a bit different. Even many suppliers feel that prices for raw material should be lower. However nobody wants to be the first to make the move and this prevented prices from moving very much during the show. While cow prices were able almost to hold their levels, the prices for European bulls are impossible to obtain in Far Eastern markets. People would like to buy better quality material, but certainly not at the price the hides have reached since spring. Activity, at least in our case, was therefore limited to dairy cows, low grades and skins. Prices are not good, but this is rather a problem of the actual prices at the abattoirs. So, it was sometimes a long and hard fight to nail business down, but in the end the need to buy made it almost always possible to make ends meet. For males however, almost every attempt was in vain. The price gap between the ideas of the buyers and what we could consider acceptable was as much as $10 per hide.

The massive growth of car sales in China is still indirectly influencing the raw material situation. Car sales in China are reported to be 55% up on the same level last year and the European premium manufacturers in particular are still thriving on the situation. However Chinese officials are expecting the growth to slow down. Even at a slower pace the numbers will remain impressive.

The kill: The kill has gone up again and is slowly starting to reach normal levels for the season. Hide weights are finally starting to rise too. For the coming weeks we expect that the moderate gain in slaughter numbers is going to continue.

What we expect: We were hoping to see some clear indication and trend for the market in the coming weeks during the show in Shanghai. However, we did not leave Shanghai with a clear picture. We still believe in adjustments where they are needed and we believe it is fair to say that the majority of the people you speak to expect prices to slip rather than rise. This is what we have believed for a long time but it has so far not materialised. It seems that the show has finally helped many understand that a correction is inevitable to bring business back to normal levels.
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

€ 1,50

Weakish
 

30/+      kg

33,5/35,5 kg

27/+   kg

29/31 kg

€ 1,40

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



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