German Perspective—12.04.11
14/04/2011
What happened this week: After the APLF event in Hong Kong many have had only a short rest before Lineapelle in Bologna to check what the European industry thinks about the market and what the fashion centre has to offer for the coming season. Attendance was pretty much normal now for Bologna. The second day is still the busiest and exhibitors where quite pleased with the number and quality of the clients they were able to receive on their stands. We could not trace any real news as far as fashion is concerned. Still pretty classic and natural leather is dominating, showing the natural beauty of the material. Maybe here and there you can see some added colour effects and prints, but natural appearance is still dominating.
Some believe that, in response to inflated raw material prices, selection friendly articles such as patent leather might expect some return, but that was not much in evidence, although there were some really shiny and flashy colours on show. It will be interesting to see how consumers respond to them and it could become a real trend for the next summer.
Bologna is the fair for fashion and luxury. Shoe and accessories are dominating and this is the section of the leather business that is doing best at the moment. The rising wealth and will to spend it in the emerging markets is still making the pace and the quick recovery in some of the old economies and in the financial sector means there too the wealthy are spending. This is so strong that even the drama and the expected downturn in Japan is hardly having any negative effect on the projection and forecasts of global sales. We'll have to wait until the end of the year to see if expectations actually meet the forecast. Up to now nothing can stop the high-end markets. Climbing energy and food prices, potentially rising interest rates … nothing is making people at this end of the market worry about their spending attitudes and in a way it seems that some think that it is better that nobody knows what is to come. Consequently, all the tanneries operating at the top end of the fashion field are pretty pleased with the number and quality of their customers.
Anyone who had something to sell at the high end of the the raw material quality range was able to offer a positive impressions. Price is an issue in this section of the market too, but in most cases tanners take it with a certain fatalism knowing that they can’t actually change anything. It seems that they are more optimistic about finding reasonable agreements with clients who have, after all, little chance to change if they want to combat the market and prices.
There are hints that a ‘quality has its price’ opinion may be coming to the fore, and there are even voices saying that a higher price level for a natural premium product is the way to separate it from artificial substitutes.
The people involved in more economical lines sang a complete different song. Raw materials have gone too far and too fast and they don’t know how to handle it. Financial resources are fading quickly, losses are increasing and with the current season now getting into the final lap they are starting to pull the plug and refrain from buying. This is hitting the market for dairy cows in particular. In Europe upholstery tanners have for some time been the ones with the biggest headaches, but in Asia now too where other alternatives are cheaper and the falling US dollar is adding to the problem of export revenues the same thing is happening.
What many didn’t believe is starting to come true, and no matter how good the leather business in some sections might be, there are still definitive valuations for hides and skins and some categories don’t meet them and have more economical alternatives.
Apart from that, there are production losses in many sectors and it can’t be a surprise, that tanners are trying to get away from that. We’ve mentioned before that the quality of buyers is deteriorating and regular standard users are being substituted by non-standards who buy for whatever reason, but not because it makes economical sense. There is always a clear indication; prices don’t fit. One can only hope, that the boom in skin prices will allow garment tanners to substitute some of the garment business with bovine material again to support the demand.
Sales during the week were rather patchy again: some males, lightweights, a few heifers and only isolated minor quantities in cows. Since the market has lost almost all of its upside dynamic, the weaker dollar is now strongly weighing on euro revenues, which doesn’t seem to be taken into consideration by buyers at abattoir prices. Hides were already overvalued at the abattoir door before, and it seems that it will have to exaggerate sharply before people get their feet back on the ground.
The kill: As usual the kill is low when hides are needed and high when they are less required. The kill has increased reasonably over the past week and the numbers are where they should have been for most of the first quarter. We haven’t a clue why. Weights are still below the long-term averages. The kill should actually be reasonable with the upcoming Easter break. Further down the road we are not able to look for the moment.
What we expect: We think the market has now entered into correction mood. There are still different opinions and interests in the market, but certain adjustments seem to be inevitable. This applies far more for cows than for the rest, but in a way it will touch all grades at the end. Again it is not an issue of demand for leather, but of different valuations of the material. It might be like pulling teeth for a while, and what happens depends also on currency and the alternative markets.
| 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 |
€ 2,05 |
Weaker |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,75 |
Weaker |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,70 |
Weaker |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2,15 |
Pressure |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2,05 |
Pressure |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1,90 |
Pressure |
|
| 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 |
Share this story:
