German Perspective—23.08.11 - leatherbiz: Lea Leatherbiz

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German Perspective—23.08.11

23/08/2011
What happened this week: The hide and skin market is probably the least of the problems at the moment. Stock market crashes, the endless story of the EU debt crisis and the threat of a new recession in the US are dominating the headlines and investors are trying to escape and secure their wealth in precious metals or just by doing nothing. The hide market is holding surprisingly steady and so far not showing any signs of increased volatility. As much as one trusts in it, players are happy that there is one island of stability left in this uncertain situation. Time will tell if the hide market really is an island of stability. So far the market shows a great deal of stability, at least in public. International sales statistics are still displaying decent volumes and reports are trying to show steady market prices. If one reads and analyses what the present reports and publications deliver it is a bit of a question of whether the volumes or the prices are correct, but it seems unlikely that both can be an accurate reflection of the realities. An increasing number of players assume that the figures do not match the truth and the doubts are more over the prices than the volumes. It has been pretty much accepted for some time that the big players on either side of the market are not interested in any sharp (public) correction of hide prices.

The potential danger to existing leather contracts and the threat to price negotiations for the next season are too big, and tanners still need to clear the expensive inventories they built up in the second quarter. However, to achieve a compromise and to move enough hides from the producers’ side there have to be price concessions. It is hard to believe that tanners are willing to commit to purchases under the present market conditions without price concessions attractive enough to allow them to minimise risk. Anyway, this is just guessing as a result of the figures not matching weekly impressions for some time now.

More information about payment issues is hitting the market and many tanners are complaining about not being paid in time or at all by their clients. Trading this week was again like walking with heavy boots through sticky mud. You move, but it takes a lot of effort, with the risk that you might get stuck or lose your boot. While cows and low grades, as the cheaper alternatives, are still finding isolated interest, European males are outside the regular fresh hide programmes and are almost impossible to move. Despite all the talk about demand for better quality material, continental bull-hides at prices around the triple digit figure are of no interest. With the low kill and the constant demand for extra heavies from the automotive tanners, butchers are stubbornly defending their price ideas for the whole range of the male section and abattoir prices no longer reflect the market levels and will require adjustment.

Sales in numbers were pretty slow again. This seems to be the case for others, because increasing numbers of hides are being offered from around the trade. The optimists have not yet totally surrendered and they play on in the hope of a turnaround in the market in Asia triggered by the All China Leather Exhibition and the end of the holiday season in Europe. Prices were a dollar or so weaker and playing the currency market was the only way to ease the pressure.

The kill: The kill had been a bit better and it seemed the end of the holiday season had its effect, but numbers quickly faded again and it is just as well that there are not big slaughter numbers at the moment weighing on the situation.

What we expect: We do not have too much faith in the market anymore. In particular males up to 40 kilos are ready for a correction to get back in line with international levels. Cows might be on safer ground and might manage the situation with a moderate slide as they are taken as the cheaper alternative to cover immediate needs. So we believe that official price movements in the coming weeks will be more political than factual. No matter what the trend is, most European prices do not fit into the present international situation and this will have to be recognised sooner or later now.

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 € 2,15
 Pressure
  25/29,5 kg 27,5/28,5 kg 22/27 kg 25/26 kg € 1.85
 Pressure

Dairy cows

15/24,5 kg

22,5/23,5 kg

13/22 kg

20/21 kg

€ 1.85

Pressure
 

25/29,5 kg

27,5/28,5 kg

22/27 kg

25/26 kg

€ 1.65

Pressure
 

30/+      kg

33,5/35,5 kg

27/+   kg

29/31 kg

€ 1.45

Pressure
Bulls 25/29,5 kg 27,5/28,5 kg 22/ 27 kg 25/26 kg € 2.00
 Weaker
  30/39,5 kg 36,0/37,0 kg 24/34 kg 31/33 kg € 1,80
 Weaker
  40/+      kg 45,0/48,0 kg 34/+   kg 38/40 kg € 1.75
 Pressure
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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