German Perspective - 29.05.12
29/05/2012
Let’s see first what kind of hard facts we were able to collect this week. Trading activity was still reasonably light although the weaker euro make European hides more competitive on the international markets. The little interest that was displayed from overseas customers was generally below asking prices and only in a few cases could the gaps be closed owing to the favourable currency situation. Most buyers seem still to be pretty uncertain about when they should step into the market as they have smelled the opportunity to buy somewhat cheaper. However, with many suppliers still being pretty stubborn the discounts available are not very attractive yet.
There are a lot of cheap offers around now, that many buyers are correctly concerned about because of the quality they will finally get when they open the containers. There is no question that there are quite a number of suspicious offers around and we are convinced, that there are still a number of lots in the warehouses that do not actually correspond to the descriptions in the offer lists. Maybe what was attractive in a rising market is becoming a great danger in a falling one.
Nobody is really interested in sharp and steep declines, but there is a general consensus that a slide of about 10% would actually wipe a lot of the margin problems without really risking too much business. Nobody knows today where we are going to stand at the end of the summer and the beginning of the new production season, but with the ongoing problems with the debt crisis in Europe and the general uncertainties about the global economy it is definitely not the time to take any ambitious risk for the rest of 2012.
As a result many tanners are now calculating their inventory positions extremely carefully, looking at shipping times and buying hides as precisely as they can to cover their production needs but definitely nothing more. The opinions of what we have to expect are drifting further apart too. The pessimists are pretty cautious about the consumer products business and the potential long-term effects of the European debt crisis, while optimists consider hides and skins still to be a rare and limited product and they consider the rising global consumption to be strong enough to support and safeguard the raw material prices for quite some time. This does not even include the political and strategic decisions some of the slaughterhouse groups around the world have taken regarding the marketing and revenue of their by-products.
The situation still allows people with very different views to justify their opinions. This coming week we will see a number of people travelling to Guangzhou to attend or visit the leather fair and a number of Chinese tanners are hoping for a better picture of what they can expect from their domestic and export customers. The Asian tanners have to take decisions much sooner if they want to have the raw material delivered in time and those who get the timing right can and will make money again. Last year the correction came late but tanners can’t wait that long. They have until mid-to-late June to decide how to act in the raw materials market. This will absolutely depend on the impressions they get from shoe and upholstery manufacturers about orders and prices.
We haven’t found a single tanner around the world who finds raw material prices attractive at present, making it unlikely that anyone would realistically consider building inventories for the production of the rest of the year at present price levels. European tanners are already starting to get in the holiday mood. Only a few of them need still to buy serious quantities after their holiday break so they are quite relaxed about the coming weeks.
A major impact on the market has to be the currency situation which makes today’s US hides more expensive and may offer suppliers from other countries a certain advantage amid the general price pressure one can sense these days. The euro has lost roughly 5% to 6% in the last month and this converts to about $3-$4 per hide. If Greece leaves the Euro, further volatility has to be expected and it might drive the euro down by even more.
The total volume of sales this week was not satisfactory. We found scattered sales, not really dominated by any of the major grades. Prices were fractionally lower in euro and as far as the Asian sales were concerned down by about 2% to 3%.
The kill: The kill bounces up and down without any real explanation. Milk prices are rapidly falling again, which may lead some farmers to take the money for the cow, but basically it is not really the season for that. This coming week is short again, so the numbers will reflect that.
What we expect: The activity of the coming two weeks and the price buyers are willing to pay will tell us the direction of the market into the summer. A large round of buying might take some pressure off this market, but we still believe that things will settle only when hide prices slide back to workable levels. So, we don’t expect a rush.
| 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 | € 2,10 |
Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1.75 |
Soft |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 2.00 |
Softer |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1.70 |
Softer |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1.60 |
Softer |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2.20 |
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 | € 1.80 |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1.40 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.40 |
Steady |
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