German Perspective—02.08.11
02/08/2011
If there was anything interesting it was the general trend of buyers to buy cheaper material. Only at the very top end are buyers still focused on high-price, high-quality raw material. Other producers are trying to escape from the margin problem by increasing their focus on cheaper alternatives. So dairy cows are the alternative buy for many tanners who traditionally purchase steer, heifers and bulls. Despite steady business (the US market reported impressive sales numbers again) prices are still not taking advantage of this. Normally good demand and decent sales number would convince sellers and producers to raise their asking levels, but conversely, prices are moderately sliding and we would not be surprised to have confirmation that prices booked over the past weeks are below the official asking levels. Whatever the explanation, we cannot see the normal correlation between demand, prices and market trends and expectations. If sales are so good and producers so enthusiastic there should be much more courage on the side of hide producers to push prices higher than to surrender and hold things steady at best. It seems we can expect some explanation later this summer of what the market realities have been or are.
In an attempt to gain more market insight it is pretty difficult to gather clear opinions. Even people who normally draw clear market pictures have become vague in their statements and the same story has been repeated for many weeks now. Everyone is trying to talk the market up as being better than it is and just the pros are quoted while the cons are ignored. This is quite understandable (because who is really interested in serious market trouble?) and so far it has also worked fine.
There is different news from China and a number of pundits are quoting increasing financial issues, mainly with smaller tanneries. Quite a number are secretly for sale, because the business is not profitable any more and they just run at the absolute minimum level of production. Maybe this is just extra capacity, which has to be taken out of the market due to the reduced raw material supply, or maybe it is the result of less leather demand in the market than expected.
There is one subject on which everybody agrees. Finance is much more difficult to get in China these days and without a strong and solid backing it is much more difficult these days to have the cash ready to buy the raw material needed or to take the desired raw material positions. This is not only the result of higher prices and restrictive banks, but also because of problems with late payments from their customers too. Well, in the end we are still in between the seasons we might need to wait until productions are in full swing again before things become clearer. In the meantime the German car manufacturers have confirmed their targets for the year 2011 and this means record sales and production. In their half year results and outlook there are absolutely no doubts that productions lines will run at maximum capacity for the rest of the year, new labour will be hired and expectations continue to run high. There is not a single word about any concerns in regard to global problems or that care sales could be hit eventually.
Trading activity during the week wasn’t impressive. Tanners are still trying to buy slightly below the market and if one is not willing to take the bids there is little business to be done. In Asia tanners are still looking for dairy cows, but not at the prices needed and the little business that was concluded this week needed a short moment of euro weakness. Most of the demand was seen for dairy cows, while German bulls at the moment exceed the limits tanners have set for their purchasing levels.
The kill: Holidays! The kill is running at the lower end of the range and this will remain the level for at least another two weeks. When the first school holidays in Germany, in the north, end and this could lift the numbers a little. However, until the end of August we don’t expect any serious change.
What we expect: By the beginning of the week we will know what is going to happen in the US and if the opponents can agree on an interim solution to prevent insolvency. With the economy already in good condition it would be another bad hit and nobody knows the consequences yet. The only question is whether US consumers will spend the expected money in what remains of 2011 and if not, if that means anything for global leather production. In the coming weeks holiday makers will not bother too much and so there is no reason to change anything in the market. Only order cancellations, money problems or anything unforeseen happening could change the pattern. Fundamentally we still remain on the cautious side and leave the gambling and optimism to others.
| 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 |
Steady |
|
|
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 |
Steady |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1.50 |
Steady |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2.05 |
Pressure |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1,85 |
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 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.35 |
Steady |
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