German Perspective—05.07.11
05/07/2011
This might be understandable for the the European market where the summer shut-down is close and programmes and plans can be done a bit earlier or later, but with the increasing dominance of Asian buyers and their need to take procurement decisions earlier than the Europeans, the silence from Asia is remarkable. We have the impression that this is related to finance. It’s not only that letters of credit are coming later and with delays; we hear more and more frequently that tanners are awaiting their new credit lines to be released from today onwards only. This means that many do not have sufficient and secure credit resources to proceed with shipments and purchasing activities before the credit resources are secured. This might be an impression only, but the facts are speaking for themselves. Next week we will see if the beginning of July was really an important date or if it was just a coincidence and the silence was just coincidental.
A lot will depend on the activities of the Asian market in the coming weeks. In Europe the facts are pretty clear. Most automotive tanners will continue production throughout the summer break by either using contract tanning operations or by a partial shut-down only and will require further supplies. With the expected low kill, the reduced soaking should be enough to absorb production. For the rest of the article range we will see the normal seasonal interruption of shipments due to the summer holidays, earlier in northern Europe and later in southern Europe.
In past years that was never a real worry because Asian buyers filled the gap nicely and required adequate shipments during July and August, which absorbed enough of the summer kill to keep things pretty easy in Europe. If this does not happen this year it could build up inventories to levels we haven’t seen for a long time now.
The relaxed position of sellers could finally disappear in time for the All China Leather Exhibition in Shanghai in early September. With still more than eight weeks to go, really nothing is decided or known yet. If tanners in Asia have been holding out for too long and need replenishment of higher quality raw materials, they might come to the market in July in the hope that a big volume of raw material is waiting for them. Well, that would certainly not be the case in July and a flurry of interest for a week or two would be enough to wipe any concerns away again. Those who are favouring this position are also stressing the fact, that Chinese tanners are said to be focusing on higher quality hides and leather for the next season as only they allow them some kind of a chance for a positive margin. Anyway, as far this week’s business is concerned, it was almost non-existent and only some renewal of programmes took place. Interest from Asia was almost non-existent and the rapid recovery of the euro after the parliament approval of the austerity plans in Greece made European hides far less attractive on the international markets again. Since other origins did not advance in price, our hides have become about 2% more expensive in a market that has no room for price increases at the moment.
Since the next round of abattoir buying is due in the coming weeks, we will have to see if packers are willing to understand this fact or if they will again just stubbornly insist on inadequate prices with the argument of the low kill. In the end every seller needs a buyer and so it has to be seen which market view is going to prevail. With prices fading, a cautious view on decisions before the summer seems to be rather advisable. The few sales during the week were at steady or fractionally lower levels, but this was actually all still before the drop in the exchange rate. Activity was rather focused on males and less on females, which might be explained by the trend for better quality raw material.
The kill: We are now entering the lowest period. School holidays start and this is reducing abattoir activity and consumption at the same time. This year the school holidays started early in our region and this will keep levels low throughout July. Like in most parts of the world, cattle prices are high and beef prices are not following, which is affecting numbers. There are very few arguments that could change the situation in the weeks to come.
What we expect: The low kill supports the market, but weak demand is keeping things quiet. The weaker dollar is putting exports under pressure and the European market is offering no support. All this in addition to the signs from China of more cash problems and a slowdown in the economy makes us believe that the prices for next week might show little variation in the price lists, but in reality the trend should be moderately lower. It seems that anyone who wants to sell might be prepared to take a little less. This might not apply to top-quality hides, but for the bulk of material it seem to be the way things are at the start of the summer period.
| 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 | € 2,20 |
Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1.90 |
Pressure |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1.90 |
Pressure |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1.70 |
Pressure |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1.50 |
Pressure |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2.10 |
Pressure |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1,95 |
Pressure |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.75 |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1.35 |
Pressure |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.35 |
Steady |
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