German Perspective - 28.08.12 - leatherbiz: Lea Leatherbiz

Intelligence

German Perspective - 28.08.12

28/08/2012
What happened this week: The market mood is changing a bit, but the situation is still two-fold. The players related to the heavy and high-quality end remain pretty much supply-driven and point to a low kill, low stocks and steady demand. They draw the logical conclusion, that prices will remain firm because demand will continue to outstrip supply after the summer holidays. This might be the case and could be the nucleus for another difficult round at the abattoir doors. Packers tend to see only the price-positive part of the market mix. So far they are still supported by some of the hide processing industry being in the fight for market share and control, but also by some tanners who gambled on the chance that the vacation break would build some market pressure and unsold inventories. Unfortunately they came back from the holiday to find that the kill of the desired qualities had fallen so much that there have been few if any hides waiting for buyers. However, all this is only a very regional and segmented situation and one should not leave the rest of the market out of the analysis.

In the past months it seems that the European market has been reduced to the hides related to automotive and premium leather production and this has been the anchor for all market decisions. However, many forgot that the market for non-premium hides in Europe is still far larger in size. The firming up of the US dollar and the rising US market has blinded a number of people to economic realities and invited them into bull market speculation. This was driven by the idea that the buying price of today will be right tomorrow. This theory started showing a few cracks recently. While buying prices rose, selling prices did not and all the stories and reports about a firmer market were not  reflected in rising selling prices. This has been the real scenario for the lighter and standard categories for quite some time.

The euro bottomed out and despite all the worries about Europe the currency has now gained more then 3.5 % which converts into the same decline of returns on export sales, that is between EUR2 and EUR4 per piece. This reality may not have reached everybody’s mind, but sooner or later numbers become stronger than emotions. The international market has also lost some steam and now everyone is waiting for the results of trips to Asia in the coming two weeks. So far, the only positive argument one can find are generally rising commodity prices under the lead of oil and people can discuss if this is good or bad for hides, skins and leather.

Meanwhile the buyers have taken a break and sales activity slowed down this past week. The little flurry due to some ‘back-to-work’ issues faded quickly and the Asian buyers pulled back; possibly they have enough inventories built up now and are waiting calmly for a wave of overseas suppliers. We still believe that the key question in this market is the number of semi-finished hides that could become once again the wild card over the coming weeks. How many are there, what is their valuation and how desperate are sellers to move them? To those who think this will not be enough to bring about change, we could also ask about leather orders, how much manufacturers are paying for leather, what the cash-flow situation is, what the kill is going to be, and what the financial and currency market will do. All these questions will be the drivers in the coming weeks and by the end of September we should have a clear picture. For this week, sales were limited and prices steady in US dollars, while down in euro. Sales in Europe were at steady levels, but all volumes were pretty limited.

The kill: The kill is still well under par. A bit better in the north, low in the south and packers are not happy about their business at all. With the temperatures falling a bit we should see a little improvement in the next week.

What we expect: For the next week we expect a pretty subdued market. It does not seem that tanners are ready for any quick action in the market. It seems rather that the Chinese will sit and wait for a while. How long they can is something we might find out at the All China Leather Exhibition in Shanghai (September 4-6). For the coming week we think we will remain in the narrow band of prices with only some limited and private trading taking place. Currency will be the most important factor.
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 € 1.80
 Steady

Dairy cows

15/24,5 kg

22,5/23,5 kg

13/22 kg

20/21 kg

€ 2.00

Weakish
 

25/29,5 kg

27,5/28,5 kg

22/27 kg

25/26 kg

€ 1.75

Weakish
 

30/+      kg

33,5/35,5 kg

27/+   kg

29/31 kg

€ 1.55

Weakish
Bulls 25/29,5 kg 27,5/28,5 kg 22/ 27 kg 25/26 kg € 2.15
 Weakish
  30/39,5 kg 36,0/37,0 kg 24/34 kg 31/33 kg € 1.95
 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






Leatherbiz.com cannot be held responsible for content if the language setting is changed from English.

The translations provided by Google Translate are automated and therefore might not be accurate and may contain incorrect, offensive or misleading language. We offer this facility as a guide only.