German Perspective - 16.10.12
16/10/2012
Asia was not only represented by leather buyers and designers, but also by a good number of Chinese tanners who were walking around either extending their holidays in Europe or taking a chance to look for new articles or just to get an impression of the market mood in Europe. They might have taken home a message that Italian tanners are still the masters of fashion, colours, beauty and creativity.
This show was a firework of beautiful leathers. Natural beauty and classic articles were dominating with a nice garnish of metallic and artificial prints with superb finishes and coats. The booths of the premium producers supplying the high street fashion brands were all busy and none of them complained about the number of visitors or the amount of business. The wealthy of this world have not only become more numerous, they are also still willing to spend on good materials and exclusive products. Interesting too was that vegetable leathers of all kinds were in good demand, as well as more skins being discussed wherever they can be used, such as in women’s shoe productions; this is also as a consequence of record-high calfskin prices and the increasing demand for outstanding quality and elegance.
So, for what the show in Bologna is really for – Italian style and quality – it was a success. For the rest, the situation might have been a bit less exciting. Standard leathers and manufacturers related to the auto industry were far less happy. In the meantime, the long-awaited declines of production in the premium car industry are going public, despite all the record shipments of the premium manufacturers in September 2012. That was the past, and for the future moderate cuts in the production of selected models are starting to hit raw material demand too. This was quickly realised by several suppliers and it took only until midday of day two for some sellers to decide to take what was on offer from the available buyers, 3%-5% lower than the asking price. For some cow selections it might even have been more.
As usual at such events, news went round fast and new levels were quickly established. Any attempt to negotiate higher levels were pretty useless. Consequently all top quality hide and calfskin producers left the show pretty happy with nicely filled order books and we tend to believe that they are cleaned up for 2012 already.
For mainstream raw materials the era of a supply-driven market seems to have ended and the focus of the market has shifted back to demand and profitability. We understand from our meetings and discussions that we are still in a period in which a lot of market policy decisions remain unclear. While it is easy to understand that some packers are trying their utmost to hold prices high, it is still unclear how much support they are finding for their strategies in their customer base. There is a hypothesis, that also some of the larger clients in China could have an interest in protecting inventory valuation in the assumption and expectation of a lower kill and a new round of a supply-driven market. This has been the story of the whole summer and it has not worked out so far. In the end it still requires leather prices to rise, which hasn’t happened yet.
Sales this week were reasonable due to purchases of regular buyers and the shelter we still get from the US market. A fractionally higher US dollar helped a bit too, as did declines that were marginal on cows and a bit more extended on bulls. Volumes were acceptable due to the size of the individual contracts, but interest was not really widespread.
The kill: The kill is now starting to rise week by week. We had a full week’s production and apart from the volume the weights are fortunately rising too. The temperatures are falling and the kill will continue to go up. Cows are still dominating the slaughter mix in volume and the coming eight-to-ten weeks should to continue to supply good numbers.
What we expect: The question is now if we are in a correction phase for the moment or in a change of a trend for the average and lower end of the raw material range. We think the two parties at the table are still fighting and that it is more a matter of position and ideology rather than the result of a dynamic market. For the coming week, however, we expect further pressure as not all have yet realised the latest news.
| 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 | € 2.10 |
Weakish |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.95 |
Weakish |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.80 |
Weakish |
|
| 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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