German Perspective - 05.06.12
09/06/2012
So, among all commodities hides were still a strong performer with levels holding reasonably steady and for European suppliers the weak euro has eased a lot of the global price pressure. However, we will have to see if this has already taken into account the turmoil in the financial markets at the very start of June or if the consequences will only be seen this week.
The Leather and Shoe Fair in Guangzhou did not deliver too much clarification about the leather market. There are rumours of fierce price competition in shoe prices, but fundamentally it seems that the larger manufacturers producing for the big brand names, wholesalers and retailers are still reasonably busy while the add-on productions producing for the ‘no-names’ are the ones feeling the pain and the declining demand for consumer products. This is also widening the price gap between the premium buyers and the rest of the market.
Selling activity in our case was actually limited to the edges of the week. Monday, despite being a holiday was busy and Friday too. It is not big volume and rather hand-to-mouth, but still enough to keep business moving and to prevent stocks from going up to critical levels before the summer. However, this is doing nothing to build confidence that we are heading for better times. Who could seriously believe in a great rebound in leather demand when the general economic outlook in the major consuming regions is as gloomy as it is?
If one looks at the lamb and sheepskin markets over the past weeks we can only hope that they are not an indicator for the hide market. We admit that there were stocks around but this business is much more dependent on the market in Hebei Province in China, which is strongly influenced by customs investigations at the moment. The sharp decline in sheep and lamb prices is also a reaction to declining leather demand, and not all just because of the garment sector. If prices do not rebound soon, it might have an effect on part of the market for bovine material too. Independent of the skins market, it will be interesting to see if there is any reaction in the forecasts and budgets of retailers for the second half of 2012, to see if they revise their plans or leave them untouched.
The western world is starting to prepare for the summer holiday season and in about a month from now the vacation time begins, lasting until the end of August. As we all know the end of the holiday period can be pretty dangerous and tricky and a lot of what has been hidden away from the public suddenly comes to light. Many will wait now to see if central banks and governments act again with any kind of stimulation, and to see if this is actually the right tool to overcome the deep crisis. Europe, the US and also Japan need to solve their fundamental problems and China needs to decide how much growth is required and can be handled without creating other unwanted consequences.
Another key issue for the summer is going to be the question of whether the strong performers in the leather segment--automotive and luxury items--can maintain their success story. At least for automotive one has to be attentive. Despite all the great stories from auto company headquarters, one has a different feel talking to dealerships and sales people. Order books are melting away and are being renewed by leasing contracts and some exports (not all) to keep the business going. Some may have forgotten about the times when contracts were also cancelled. For us, the solid part is still footwear and accessories, which depend on fashion and weather. If cold and wet weather comes early this year and retailers can liquidate the previous season’s stocks, things might get better or at least stay stable.
The total volume of sales has been adequate this week. Prices depended a lot on how the currency market was played. If the timing was good, prices were about steady, if not they went into moderate decline. Prices for heavy, high-quality bull hides were almost steady while lighter weights and cows had to face marginal declines.
The kill: The kill remains pretty steady. The holiday on the Monday after Pentecost cut production by a day. Hide weights are falling, which is reducing the supply of heavy males again. The coming weeks will be regular again and the production should slowly enter holiday mode with light weights.
What we expect: Presently the market is still supported by limited stocks and normal product flow as well as by the weak euro, which is compensating for the international correction in the market. Sellers’ resistance to reductions will remain strong and buyers’ attempts to buy cheaper will remain fierce. Prices will not move much for the moment and, if at all, marginally lower. We remain on high alert over what is happening in the financial markets.
| 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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