German Perspective—21.02.12
21/02/2012
The reasons have been stated already a number of times and it is, as usual, a bit of everything. This time the sellers had the conditions on their side. The sharp decline of supply played mainly into their hands as increasing demand met decreasing supply. More and more buyers started to be scared of being left behind and decided to join the party, which has increased prices week by week. However, it would be too easy just to believe that this is the result of a brilliant economy or a fabulous leather business. The facts are clear and have been repeatedly mentioned in the past. Some sectors enjoy strong and steady demand and their demand has met decreasing supply. With limited options of substitution buyers have had little chance to escape and have had to follow the market. What started slowly has pulled more and more players in.
In the beginning prices were still attractive after the decline in the last quarter of 2011, but sellers gained control of the market so quickly that buyers in general had little chance and prices jumped. Except for special segments, the market has been driven by the Asian buyers only. The main buyers in Southern Europe stood aside when prices rose. Lack of orders, lack of cash-flow, lack of margins made and make it not really attractive for them to purchase raw material. Asian tanners on the other hand are famous for buying in rising markets and missing falling markets and this is what happened again. The question now is about the level hide prices will need to reach before tanners walk away from purchases. Those tanners that have been in the market early and bought in time may still have decent cost averaging, but those who missed the boat at the beginning will face the pain much sooner. From Europe we expect little support for the market due to serious cash-flow restrictions, but in Asia there seems to be enough free cash and bank support around for people to remain at the poker table.
Trading this week was pretty strong at the beginning of the week with still numerous bids for low grades and dairy cows to choose from. Prices were up in USD, but insufficient to cover the present purchasing levels at the abattoirs. Other hide types did not find much interest despite all the news about shortage of offerings, which tells us that there is still a limit in hide prices.
We have certainly been too cautious about the market situation and had to be reminded that if the market moves there are still enough interested parties to keep it moving. However there is still very little to convince us that the present price levels are more justifiable than they were last year. We understand the reasons, but we also understand that leather making is not on safe commercial ground at the moment and not all tanneries will be able to fill their drums at a loss. So, apart from the price it is also pretty important to select your buyer carefully.
The kill: The kill remains pretty low and the carnival season is now peaking. Not much will change next week. Abattoir prices have gone up by almost double and many packers still think this is not enough. The weather is now reverting to normal and we expect slightly better numbers toward the end of the month.
What we expect: The trend is your friend at the moment and it will take a little while for this to change. However, we remain on high alert. Many say, that trading is thin because of a lack of offers, but we still see enough hides around; it’s just that the buyers don’t want them because they want to stay with standard and secure suppliers. It might be difficult but when prices are too high and the preferred materials are gone, one switches. We will still face trouble with the buying prices and are keeping a very close eye on buyers and payments. This market will eventually be sorted out by the wallets and the first signs of this are already there.
| 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 | € 1,90 |
Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1.70 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1.85 |
Steady |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1.55 |
Steady |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1.45 |
Steady |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2.20 |
Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1,90 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.70 |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1.30 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.30 |
Steady |
Share this story:
