German Perspective - 25.09.12
25/09/2012
Buyers are not in a position to spend more money on raw material; each week, they find a seller who is willing to move some hides at steady or fractionally higher prices and every week sellers are willing to keep sales and shipments on safe ground and take some of the bids around so as not to accumulate unsold stocks and to keep market risk at minimum levels. Everything would be fine if the supply chain were operating at a profit; nobody would complain about the market conditions we are in. Raw material can be moved; leather orders might not be brilliant but are possibly good enough to keep the drums rolling and even with the smallest positive margin there would be very little to complain about. However, except for the usual suspects, most of those processing and tanning admit that they are just breaking even or are even operating in the red. This has been the case for a while and cannot be the ongoing basis of operations despite cheap money policies and low financing costs. High raw material and production costs require more finance and borrowing and it is not an easy task for many in the tanning industry to secure these. This has caused most of the hand-to-mouth planning and has forced many tanners to go from long-term raw material planning to buying against incoming orders or to fill productions from week to week.
This has not only given selected wet blue suppliers a good business basis delivering custom-tailored volumes and selections, but also kept the raw materials business steady, because tanners in need of raw material for their beamhouses could never stay out for long enough to build serious market pressure. So, any excess of raw material was absorbed by wet blue productions, which has held the raw material market in the balance for a while.
The news we got this week from some of the premium car manufacturers, that the outlook is no longer as bright as it was, so the balance in the market could see some cracks. If the seasonal kill in Europe provides more hides in the last quarter, the balance could be upset and this is what buyers and sellers are watching for now. The conviction that automotive will take whatever is produced in heavy and quality hides is now facing a few question marks, but without any consequences so far.
Currency is the main point of concern at the moment. Exporters from the stronger currency markets face serious headwinds because the gain of their currency cannot be converted into higher prices. The September fairs related to leather have so far been neither bad nor particularly good. High street fashion and accessories are still doing quite well while the standard consumer items are still a mixed bag. Price is the issue and retailers are still pretty uncertain about what to expect from the winter semester.
The global economy is slowing down, high energy and food prices so far are not making anyone exceptionally positive about sales for the next few months. An early and cold winter would help on one side, but also increase energy bills on the other.
Sales and trading this week were again acceptable in volume and not acceptable in price. Dairy cows as the cheaper alternative for males went best and the rest was covered by almost all items. Price negotiations are hard and complicated and most prices concluded were almost unchanged, with lower returns on export sales to Asia. Result: Hides are still moving, but hardly anyone is taking any benefit from it.
The kill: Following the calender, autumn has begun. Beef consumption is still subdued and the kill itself is better than in August, but no big volumes are coming in. However, the numbers continue to increase gradually and this trend should continue in the coming weeks.
What we expect: Most people are now waiting for the Lineapelle exhibition in Bologna (October 9-11). Asia has a holiday week at the beginning of October for the mid-Autumn festival and people are waiting to see the results of domestic retail in mainland China, as it is normally a good shopping season. Generally we think, that the total paralysis of price movement will continue. The market is waiting for a new trigger for a new direction. We do not see any stimulus from Europe, so we have to wait for the Asian market. We still see more downward than upward potential.
| 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 |
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