German Perspective—04.12.12
04/12/2012
The problems in the Italian upholstery sector are depressing supplies of fresh cow hide and this is leading to a slow-down in turnover for many. This is starting to show at the abattoir doors and there are hopes of further declines in prices for the December production. This would then finally reduce the prices to workable levels after a long time of inflated levels at the abattoir door.
Everybody is wondering how good the leather business really is. In Europe the general consensus is that only the top end of the quality line has regular and sufficient orders. The rest is stuttering and not what it should be. So, all eyes are still focused on China where every report talks about good domestic consumption and leather demand. Everybody is wondering if this can actually compensate for the difficult retail conditions on the export side.
Most segments of Chinese retail are reported to be better, even the upholstery sector, which is pretty poor in western economies. In the end however, it is not so much about demand, it is also pretty much about price. While we saw a certain correction of the exaggerated price levels, driven high by the automotive industry, until the end of the summer we are still seeing US hides climbing from one week to the next.
The present price levels are in part supported by a rise in split revenues. However, collecting the prices for standard leather, comparing them with the actual split revenues and leather prices, it is still hard to end up with anything profitable. However, Asian tanners continue to buy and to keep the markets up. It seems that the reason is not just better domestic retail consumption, but also a partial speculation about less raw material being available in 2013. They feel it’s better to have something now than to run after dirty and low-yielding hides at whatever price level in the first quarter of 2013. This might be the idea of many players in China at this stage.
Upscaling of quality and price is another trend we see in China and this favours better-quality origins too. Many Chinese tanners are trying to source where they have long-term opportunity to buy quality raw hides and will not be forced to shut their beamhouses and take the standard wet blue that is offered to them. This makes Europe in many ways attractive for the long term, but that will require changes to the standard technologies that are favouring overseas hides, which are so much more standardised and easier to handle at an industrial level, at least when it comes to side leathers.
Sales and interest this week were just about steady. Fewer offers and only selected interest at the price levels reached in combination with the weaker US dollar made sales and volume not as easy as they were. However, with the high uncertainty about the market trend into 2013 one would need to take today either a long or a short position. We see both at the moment. Some are trying to build stocks with the lower prices at the slaughterhouses while others see more risk in the market and demand and try to remain sold forward. This is not a good time of the year to judge as the period before the Christmas season and the Chinese New Year can be pretty misguiding. Prices were in the end pretty steady with a fraction of a decline due to the currency influence.
The kill: The kill is declining and the numbers are well below the levels seen last month. In particular males are low in the slaughter mix, which suits most of the people. The beef industry is not signalling any increases until the end of the year and says that the beef needed for the season is possibly already sitting in freezers.
What we expect: It is hard to believe, that the market could gain any momentum for either side until the end of the year. Prices may fluctuate a little, but a serious change or new trend cannot be expected. Sales and shipments to Asia seem to be good enough to prevent another correction, while it is unlikely that demand is strong enough to push prices seriously higher either. This is possibly the best of all alternatives anyway.
| 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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