German Perspective—05.04.11 - leatherbiz: Lea Leatherbiz

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German Perspective—05.04.11

05/04/2011
What happened this week: The trade gathered again in Hong Kong and tried to figure out what the status of the leather business is. After a long period of raw material gains, extended order books and what was called ‘demand outstripping supply’ a lot of people were wondering if the meeting in Asia could become a turning point. Well, for those who were scared, it was a relief to see that the answer was, ‘not yet’. Others who thought it would just be an extension of the party, that it might get even hotter, had to understand that the number of beats of the music is slowing down. So, everybody got a bit of what they wanted. Down to the facts. The attendance was good and at least we had the impression that the traditional pattern of activity was different. While normally the middle day is the most active one, we could not shrug off the feeling that this time the first one was the most active one, with the second still pretty good and the last one pretty quiet. Many of those with far to travel went home after the second day and so Friday was a casual and relaxed day for more personal meetings and discussions a bit outside of the business focus.

The conclusions and resumes were pretty mixed at the end of the show. While some were reporting a lot of activity and strong sales, others were less enthusiastic and were not that satisfied with their results. We think it is pretty much a question of where you came from and what kind of origins you represented. As far as the reports about the leather business were concerned it was pretty obvious that the side leather orders books are still pretty well filled, automotive for the moment is also still running at high levels, although upholstery is only performing in the high end, while the average and low-end struggle. In one argument however, they were all united: raw material prices are too high to allow profitable leather production, so we had confirmed what we knew already.

It was pretty difficult to reach a common opinion about the market trend for the near future. For our market it seems,that the situation is pretty clear. While males and lights are still supply driven, cows are far from the general market level and since they are in the majority the raw material base for upholstery tanners, optimism for the near future is pretty limited. The asking levels are about 5%–7% higher than the alternatives and possibly 10% above of what tanners are willing to consider as their best ideas. Consequently there was very little business done and if so it was small trades rather than real business. There were some larger sales at levels that are closer to the competitive origins, with the sellers pretending to have mixed recently bought hides with older, cheaper stocks. One may believe them or not. At APLF, Chinese buyers were happily visiting their suppliers, but mostly to sniff around for bargains. Since they didn’t find many, there was not too much business for the average-quality hide. For top-quality hides the luxury market is still moving. Low-grades did well too as they were in demand as tanners tried to lower the average cost price of raw material. Lamb, sheep and calf continued to perform very well and prices are at, or very close to, record highs.

The feel we have had for some time, that in China a good number of wet blue stocks are around, was confirmed. With the raw material market being too high for tanners and the intention to take any extended positions low, many are covering their short-term needs locally with wet blue at prices that are below any of the present raw material levels. No one except the owners know how many hides and at what average price they are bought, but we got the impression that the stocks are quite large and the average price reasonably attractive, so that sellers are not yet concerned and can wait.

Sales this week were reasonable in numbers, but not spread evenly over the grades. Low grades, ox, heifers and odds did well. Also males found enough homes, while the bread and butter business of cows was far from the normal weekly volumes. Low grades got better levels; the others were steady and bids for cows were far below asking prices.

The kill: Absolutely no change in the kill. Low numbers, low slaughter weights and a mix that is still favouring females far more than males continue to dominate. This has been the situation for a while.

What we expect: Well, it is pretty clear, that our dairy cow prices are far too high and there is no indication that the other markets are going to offer us any short-term shelter. Let us see if this is reflected at the abattoir door this month. The rest of the market will not be easy, but fluctuations will be limited. It will just be a fight to fine-tune the prices to the necessary levels that will be hard work.
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 € 2,30 Steady
  25/29,5 kg 27,5/28,5 kg 22/27 kg 25/26 kg € 2,10 Steady

Dairy cows

15/24,5 kg

22,5/23,5 kg

13/22 kg

20/21 kg

€ 2,10

Pressure
 

25/29,5 kg

27,5/28,5 kg

22/27 kg

25/26 kg

€ 1,80

Pressure
 

30/+      kg

33,5/35,5 kg

27/+   kg

29/31 kg

€ 1,75

Pressure
Bulls 25/29,5 kg 27,5/28,5 kg 22/ 27 kg 25/26 kg € 2,25
 Steady
  30/39,5 kg 36,0/37,0 kg 24/34 kg 31/33 kg € 2,15
 Steady
  40/+      kg 45,0/48,0 kg 34/+   kg 38/40 kg € 1,95
 Steady
Thirds 15/+      kg 25,0/27,5 kg 13/+   kg 24/26 kg € 1.45
 Steady
Thirds bulls 30/+      kg 38,0/40,0 kg 24/+   kg 33/36 kg € 1.40
 Steady




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