German Perspective - 04.09.12
04/09/2012
Having said that, one has also to realise that the positions of tanners and traders are pretty individual and there is no one-and-only situation for all of them. You see as many tanneries with very little inventory as you see warehouses packed with hides. You meet sellers who have their books pretty clean and others from whom you can smell the fear that this market might not hold, causing losses from unsold inventories over the coming weeks. Many of the assumptions we made over the summer have been verified: leather orders in total are down, margins are tight if not negative, wet blue stocks have built up in various places and leather buyers show little interest in improving their prices with all the global uncertainties around. Looking at this cocktail, one can understand why the market finds it so difficult to move and leave the very narrow band of prices seen over the summer. When one pushes here, another pulls there and vice-versa.
If there is anything at the moment, then it is the feeling that buyers believe they will not be without supply if they refrain from buying for a week or two and many have now left for the sidelines and are waiting for Shanghai. Tanners have the impression that the supply card has been played for so long by suppliers that it has to be a bluff from at least quite a few and there is no reason to run after hides, at least in the case of many of the mainstream types. The increased slaughter in some global regions is playing an additional role. The number of tanners who are not willing to burn money in production is rising day by day and anyone who can adjust production levels to make orders profitable is doing so. Leather buyers are not showing any indication to be so eager for material that they are actually willing to adjust their prices on the upside and more and more leather types are being downgraded to match the price targets of the manufacturers. In the end this does not mean the total collapse of the leather business but a bit of air is being released from the bubble. If there is still one segment where demand remains strong it is automotive, but looking at the discounts of prices and inventories of unsold cars in some markets one wonders how long this is going to last, independent of the bright forecasts some brands are still publishing.
It seems that the market is is now trying to find a way for a moderate price correction. Packers don’t want to hear the news and will hardly surrender without fight. However, some of the big players are already seeing the writing on the wall and adjusting levels already in private. For the European trade the weaker US dollar is also a factor and this converts to a value decline of more than 3% compared to a month ago.
As far as sales were concerned it was probably one of the slowest weeks of the year so far and sales were absolutely minimal. Except for a small number of isolated lots, interest was non-existent. Prices were difficult to set. The weaker US dollar makes calculations difficult and with buyers not willing to pay any currency-related differences most discussions were postponed until meetings in Shanghai this coming week.
The kill: The number rose a bit this week although not by much as beef sales still remain poor and packers are suffering from high cattle prices and inadequate returns. However, the kill should now move moderately higher while the effects of higher feed prices are unlikely to be seen before October or so.
What we expect: This coming week the big showdown will take place and it will be interesting to see what happens when the trade gathers at the All China Leather Exhibition. It seems that the demand side is starting to take over from the supply story. We expect strong resistance from sellers with lower bids, but it seems the market realises the need for a moderate correction in many grades.
| 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 |
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