German Perspective - 18.09.12 - leatherbiz: Lea Leatherbiz

Intelligence

German Perspective - 18.09.12

18/09/2012
What happened this week: The week after Shanghai failed to have any sobering effect on the abattoirs and they continued to insist on more money for their hides. Some of the enthusiasm faded a bit, but in the end more money was paid, which is in total conflict with the market realities. In particular the strong recovery of the euro is hitting hard and by the end of last week we had reached the next big figure; we saw $1.30 to the euro after the expected decision for another money-flooding programme was announced by the Federal Reserve. So, the focus has shifted from the EU debt crisis to the US economy and the labour market and the money markets have a new toy to play with.

The logic of more liquidity, a falling US dollar and rising asset prices worked again and investors will be happy. It remains to be seen if the same can be said about the tanning industry. For the moment the balance of values of the various hide origins has shifted and US exporters will greet the news happily while EU exporters will regret it. US hides are becoming more attractive while EU hides are losing a bit of their shine. This was certainly not part of the scene when people began to discuss hide prices. What might be little important for the premium hides that stay in Europe anyway is highly significant for those who need to sell the majority of the raw material overseas and also tanners who are living on export sales will see a great deal of their competitiveness fading now.

One thing is for sure: If the recent rebound of the euro is not just a flurry, a firmer currency will make the European recovery an even more difficult task. In the meantime almost the entire European hide market remains driven by the endless confidence in the success of German premium car makers and their insatiable hunger for heavy and high-quality hides. The unlimited confidence of the packers and the trade is spreading from the core region far into other areas and hide types and is propelling average hide values beyond their fair values. So far tanners haven’t set up a defence line or an exit strategy; they can just hope that they will eventually be successful with higher leather prices. Otherwise this will have an ugly ending.

For the moment there are still enough leather producers in need of raw material to fill productions for product flow still to be comfortable for the sellers. Prices may not be sufficient to cover costs and abattoir prices, but that doesn’t seem to bother many for the time being. Despite declining leather orders there is still enough purchasing interest around to clear productions of most grades. We fail to get a clear picture of how leather demand is structured at the moment. Some people talk about better orders for upholstery, but to us it seems more a matter of the season than higher consumer demand. Shoes are in the summer season at the moment, which is never really good news for leather consumption and so we are stuck again with the automotive and luxury markets as the top performers.

Apart from the standard programmes with European buyers for male hides, most of the interest this week came from Asia. Chinese tanners were bidding at best last price levels and only willing to offer a fraction more in US dollars for selected items. However, nothing is enough to compensate for the currency losses and actually US dollar prices haven’t moved much since the exchange rate was 6% better than it is now (which equates to between EUR 3 and EUR 5 per hide). Buyers are mainly from the shoe tanning industry, while upholstery tanners have mostly moved from medium-quality hides to lower and cheaper materials, which are enjoying a strong performance from being the cheaper alternative. Although one can smell the cash-flow problems already, it is not yet reflected too much in delayed letters of credit openings, which is good news.

The kill: Some late and warm summer days kept beef consumption under control. The kill this week wasn’t too exciting and positive weather forecast for the coming weeks might delay further rises in the near future. However, the holiday season is now over in all regions and numbers should reflect that. Hide weights remain pretty low.

What we expect: What can move the market? The basis for the coming weeks is set by the sales and abattoir prices for September. The currency is affecting negatively the calculations for export sales. So, asking prices in US dollars will rise but will not be paid in full. In Europe most of the business for the coming weeks is done and so the price front will remain pretty deep frozen and in the next week little will change with not much business to be done.


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

Steady
 

25/29,5 kg

27,5/28,5 kg

22/27 kg

25/26 kg

€ 1.75

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 € 2.20
 Steady
  30/39,5 kg 36,0/37,0 kg 24/34 kg 31/33 kg € 2.10
 Steady
  40/+     kg 45,0/48,0 kg 34/+   kg 38/40 kg € 1.90
 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.