German Perspective—07.12.10
07/12/2010
China’s government has announced that it is going to tighten policy to fight inflation and to prevent asset bubbles, in particular in the real estate market. We do not expect any short-term influence on the hide market, but long term this is certainly something to watch. In the meantime the market has still pretty much been driven by positive emotions. The media is reporting widely about rising commodity prices and cotton, wool, agro-products are mentioned beside the standards like oil and metals. Many are preparing for price-rises for consumer products in 2011 and many manufacturers and retailers are already informing their customers about higher prices in the year to come.
The hide market remains shaken by the financial markets. Psychology rules. With every cent the US dollar gained, the mood and optimism grew and with every cent it lost, the shine faded. The market itself in Europe is pretty now pretty much run by the season. Although the demand is still pretty good many tanners are closing for one week over Christmas with some extending the break to two weeks. So far, so good. But the hides produced during that period need to find a home as well. Contract tanners are said to be fully booked with no further capacity to offer and there are also still many who are not tempted to salt hides. So, despite the steady demand the market is not yet really ready to see higher prices when one still needs to move the hides week by week in fresh.
As mentioned above, the sudden turn of the trend of the currency market had a sobering effect on many. Whatever the next weeks bring for the euro it was a quick and strong hint how fast things can change and how extended the amplitude of the swings have become.
The Asian markets were still pretty active in the first part of the week but slowed down as the week progressed; by Friday their interest had almost totally disappeared. It is still shoe upper and handbag leather that are the driving force. The early winter has offered footwear retailers a perfect start to the season and with the stocks still being low from the good clearance last year, the feeling at the retail level remains very good and is bolstering the mood for the seasons ahead. The start of the Christmas shopping season has also been pretty good and leathergoods and leather garments seem to be much higher up on shopping lists than in the years before. We don’t need to talk about luxury items; the wealthy around the globe don’t seem to have any limits and most luxury brands continue to experience good sales and rising interest. Stock clearance should not be a great worry in this segment.
In upholstery we hear however much more of the blues, as we have almost all of this year. The top end is enjoying strong demand as in the luxury segment in general, but the medium and low end continue to suffer from the price pressure and competition from cheaper artificial alternatives. These materials are constantly gaining market share and weigh not only on the volumes of upholstery tanners but also on calculations. This is also leaving footprints in the market in general. Those upholstery tanneries who are able to optimize the hides best can still handle the situation, but for a straightforward production of central European hides in an upholstery tannery the demand spectrum and the price cocktail have become extremely problematic. This is also reflected in pretty anaemic demand from Chinese upholstery leather professionals. As strong as the performance from China has been in recent weeks, the demand from upholstery tanners has soon faded.
The demand for dairy cows has shifted pretty much to wet blue dealers, side leather or handbag leather tanners. The strong demand from all the alternatives has covered up the weakness of interest from the main buyers. Trading activity for the week was pretty much divided into two halves. While in the first half of the week interest was still pretty brisk and found strong support from the currency situation, there was faded interest from mid-week onwards and by Friday afternoon inquiries had come to almost zero. In total sales were still good enough to cover our needs and production. Most of the interest came in again for males, and heifers and dairy cows were merely an add-on to some of the shoe-related sales. Prices were steady or a bit better overseas with the help of the currency market, and steady in Europe where tanners show strong resistance to higher levels. With the interruption to production over the Christmas holiday, they still have strong arguments on their side. as long as the product can be delivered fresh, chilled.
The kill: The kill remains totally unchanged at the high levels. Even the snowfall and the cold weather hasn’t had any negative effect. Live cattle prices have gone up substantially over the past month and packers are now suffering from eroding margins. The upcoming Christmas season should bolster domestic consumption, which should keep numbers high for the coming weeks.
What we expect: The market trend for the coming week will again depend pretty much on currency and the demand from Asia. European tanners do not seem to need so many hides that they will listen to higher prices before the end of this year. There are rumours about offers of wet blues in the market that could derive from speculative productions in the past two months and might need liquidation, if the rumours are true. If the US dollar declines over the coming weeks, any of the upside potential in the market could fade quickly again. Shipping interruptions in the second half of this month due to the Chinese New Year holiday will also most likely have a temporary dampening effect on the market. Consequently we believe that at this moment a lot points in the direction of a steady market in December and until the end of the year.
| 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 | € 1,70 | Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1,70 |
Steady |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,50 |
Steady |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,35 |
Steady |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,85 |
Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1,65 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1,40 |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1.20 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.20 |
Steady |
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