German Perspective - 20.11.12
20/11/2012
If automotive tanners have strong demand and are desperate for hides it pushes the entire market high, and with any slump in this business the market drops. It is actually pretty strange and rather like the tail wagging the dog rather than vice-versa. Automotive-related hides are still a minority in overall, and some other top quality hides have performed strongly too due to the demand from the luxury sector. So the prices for these hides, rather than the real valuation of the value of the different grades, have been determining the entire market level. With the dowturn in the auto sector we have now seen the correction that was long overdue and prices have adjusted to reality.
The question now is: where are we going from here? The vast majority of people we are talking to favour a steady market into the new year. Tanners would like to save a bit, but in the end they don’t fancy any further steep decline. Even those tanners not enjoying a favourable order book admit that lower raw material prices at this stage would not actually stimulate leather demand. Those who have orders see more danger for their existing contracts if prices decline much further.
With the end of the year most of the tanners in Europe, if they had the choice, would rather like to hold prices steady until at least the end of January and see only the minor adjustments that might still be needed for some of the male grades. Consequently the market trend remains in the hands of Asian buyers. They have long been the market driver and being almost entirely focused on certain overseas selections, have kept their prices high. If that is really a level for the whole market remains an unanswered question. As usual Asians are better buyers in a firm and rising market, so we enjoy some of the positive effects too.
Shipping is now becoming a challenge. Shipping space is limited, hides and skins are not preferred items of transportation and the Christmas and Chinese New Year holidays are influencing the schedules. Obtaining letters of credit, meeting shipping and arrival requirements and making them match is a massive challenge at the moment and great stress for the shipping and financial departments.
Leather business seems to be reasonable in domestic China, consumer sentiment is improving in the US, but remains still flat in Europe and other parts of the world. Chinese tanners are still replenishing inventories and although prices are not moving higher there is enough demand for most articles to sustain prices.
Sales and prices this past week were steady, but no longer as brisk as they were the in the past two weeks. Interest was again across the board from low grades to males. Bull hides, which had been neglected in Asia for almost all summer, are now an accepted alternative to US steers. The US dollar was able to preserve the recent gains and every cent counts. Consequently, revenues this week were almost totally steady and prices hardly moved at all.
The kill: In parts of the country the kill remains at seasonal high levels. Packers still complain about poor margins and one wonders why the kill is so high then. In southern areas the slaughter numbers do not show such an improvement. Slaughter statistics for September showed serious reductions, which may now be compensated by the presently higher numbers. It seems that for some more weeks we have to expect a steady and high intake.
What we expect: As long as we stay competitive with our prices versus the alternative origins, the market will stay steady. It seems that business for 2012 is almost finished and buyers are now starting to think about their strategy for arrivals for mid-February onwards. Many are losing money and they will possibly now check first what are the chances to increase leather prices before taking new positions. This will not move the market at this stage, but we have to watch December decisions to learn what the next move will be.
| 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 | € 2.10 |
Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.85 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.70 |
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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