German Perspective - 31.07.12

31/07/2012

What happened this week: We could skip reporting for some time. This week was already one of these non-events. Tanners are off for their holidays and in Asia the purchasing interest is not as hot as many try to make out. So this week most of the activity came again from the political and financial scene with president of the European Central Bank (ECB), Mario Draghi’s, commitment to do “everything” to save the euro, support the currency, the commodity and stock markets. Well, what he failed to say and let people know was who in the end is going to pay for it all. The ECB may flood the markets with money but they cannot balance the budgets of the nations.

Recent days have mainly brought us poor and declining economic data. The hide and skin market was influenced, with suppliers taking part in the commodity market again and remaining convinced that their products will not be hit by the general weaker outlook of the global economy. They got support from export sales published by the US this week showing a high number of sale. So, the situation continues, that there is something for everyone to pick from. The optimists continue to point to the strong performance of the market in the last quarter, the lower kill in some regions and strong demand from the automotive and accessories sectors. The pessimists question the positive number of sales, point to the low or negative profitability of the leather industry, financial problems and the EU debt crisis and the slowdown of the global economy, including the emerging markets. Some also add high energy costs and the rising cost for food as a result of the climatological problems, as well as speculation and the influence of bio-energy production. The optimists, the producers of finished products, see the trend of the past months as a confirmation of their position and opinion, and turn down any negative arguments. They see their raw material in limited supply and the demand for leather and the price of it as sufficient to prevent from any major correction in prices. Tanneries on the other hand have been caught in the middle and many tanneries who had been delaying purchases in the expectation that prices would adjust to workable levels again have been disappointed; some of them have waited too long. However, what has worked until now will not necessarily work out in the future and we have to admit that we think that the sharp gains for energy and grain prices, combined with the negative outlook for the economy, could become high risk for the future of many businesses including leather.

For the moment the situation is set, and for the rest of the summer there is little indication that there will be any change in the market and we will have to wait for September to see if anything happens to change the fundamentals. In contrary to the positive note on prices and expectations, trading was light this week and most of the interest disappeared as the week progressed. The gain of the euro made business easier so very little was concluded this week. Most of the interest was for odds and cheap material while the standard products did not enjoy much interest. We would say that prices had to give back the small gains achieved in the past weeks, but this is merely due to the currency factor. As to market inactivity, we couldn’t trace any specific interest for any of the grades. All in all our last weeks’ expectations were pretty much met.

The kill: The kill this week was a fraction better, but nothing really worth mentioning. Another two weeks and then we should see a rise in the numbers, at least in the north of the country. Weight remains exceptionally low.

What we expect: We remain on the cautious side. We accept the present facts, but looking at the situation it is difficult not to worry. The money supply, low interest rates and suppliers’ intentions are holding the market up. There has been little change, with difficulties due to the currency situation.

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	Steady
Dairy cows	15/24,5 kg	22,5/23,5 kg	13/22 kg	20/21 kg	€ 1.95	Steady
	25/29,5 kg	27,5/28,5 kg	22/27 kg	25/26 kg	€ 1.65	Steady
	30/+ kg	33,5/35,5 kg	27/+ kg	29/31 kg	€ 1.55	Steady
Bulls	25/29,5 kg	27,5/28,5 kg	22/ 27 kg	25/26 kg	€ 2.15	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	€ 1.80	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	€ 1.40	Steady

German Perspective - 31.07.12 - leatherbiz: Lea

Intelligence

German Perspective - 31.07.12