German Perspective - 23.10.12
23/10/2012
European tanners, with the exception of the top end, as always, have taken their positions and feel their time has come in relation to prices. They have gone to the sidelines since the Lineapelle fair in Bologna (October 9-11). With rising prices and fading leather orders, they are being forced either to reduce purchasing due to reduced soakings or they feel that waiting is now the right policy to negotiate lower raw material prices in the end.
With the rising kill and the misty outlook for leather orders, they are convinced that this is now the right policy to bring raw material prices back to more reasonable levels. Their colleagues in Asia still seem to have a more desperate demand for material and are still spending at pretty high price levels for cured US hides. However, the high prices in the US have given us pretty reasonable sales opportunities in the past weeks, although interest was drying up this week, and the continuing rise of the euro against the US dollar did little to make our offers more attractive. Consequently we missed out on the number of sales to the Far East that we have enjoyed in past weeks.
So we cannot share the level of optimism that we still see each week from the overseas market reports. The market is still pretty much two fold. On one side we have the optimists who consider the present easing of prices in our region as a temporary local phenomenon that will disappear as soon as the seasonal kill increase fades again. Demand for raw material and leather is still strong globally, so eventually prices will recover and stay high. This is the supply party.
On the other side we have the pessimists who expect further fading in the demand for leather and the continuation of the problem of translating the present high prices for raw material into the equivalent price for leather. The majority of leather producers have not been profitable for a long time and the industry has failed to raise prices for leather sufficiently. So their logic says.
If leather prices don’t go up then raw material prices have to come down. At least from the European perspective it is pretty difficult to find many arguments to support option one. There is simply not enough good news concerning leather demand and, quite the reverse, there is quite a lot of worrying news; the problems of the car industry are only part of it. We think it is not necessary to repeat all the potentially negative effects threatening the market at the moment.
Anyway, the prices are set from the beginning and this means at the abattoir door. Whether abattoirs market themselves or sell to processors is not really important as long as they only let into the supply chain hides that fetch a certain price. As long as they get that price or store the unsold material, this still sets the levels and so it will take longer than in the past to see price corrections.
Trading this week was extremely light and only patchy sales were recorded. Prices were lower on bulls and barely steady on cows considering the negative currency influence. interest was equally spread over the different grades and there was no dominating interest an any of the categories.
The kill: The kill continues to go higher but we believe it will not go much higher, on average, any more. There might be one or two record weeks ahead, but there is no indication that volumes will increase by much. This coming week we have the Muslim festival of Eid al-Adha, which will also create a little hiccup in production towards the end of the week. Weights are rising too, so we are on seasonal schedules.
What we expect: The coming weeks will be decisive. Will demand absorb increased production? If not, will suppliers just store the excessive quantities away for the expected lower kills at the beginning of 2013? Can tanners afford price levels now and will they be able to afford the levels of the future? We still fancy an additional correction to establish solid ground again.
| 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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