German Perspective—18.12.12
18/12/2012
European hides have become attractive again for tanneries in China that want to upscale their quality. This is especially true for tanners who already have some experience of working with European hides. Those without this experience need to try European hides out if they believe securing sufficient supply from their traditional origins will become a problem. However, the serious interest is actually only for shoe upper hides or for hides that can be used for the purpose. This means that hides, male or female, that fit into the weight range of 30-40 kg and offer an adequate substance are generating reasonable interest from various buyers in central and southern China. This does not only apply to ox, heifers and bulls, but also to cows as a cheaper alternative.
Upholstery tanners in China remain pretty much on the sidelines, complaining about a weak order situation and falling split prices. However, questions about how profitable it is to produce leather are fading again. Hides have, in a way, become an investment category, dominated by those who have enough money to invest and to hold onto the investment too. This applies not only to tanners, but also to sellers and speculative investors.
Many people are starting to believe that putting money into hides is a risk-free and long-term profitable investment, and that market corrections are nothing but a chance to replenish and increase stock. For those who are not running against the wall of production costs and fixed sales prices this might be true; for those who are actually forced to produce and to compete in the market it might be a bit different.
After two reasonably quiet weeks of sales in the US, Chinese buyers became more active again and this was also reflected in Europe. While sales in the past weeks had been rather coincidental, they were a lot more broad-based this past week. Bids came from all over and selected material for shoe upper was pretty easy to sell. However, to move the whole range including lighter weight cows one had to combine packages to prevent cherry-picking. That was much less easy, but where there’s a will, there’s a way.
European tanners were less active. Some had to renew their programmes and they realised quickly that the times of worried and scared suppliers is over; people might be willing to sell, but are not willing to dump any more. Consequently deals were done quickly. Steady prices were paid without too much resistance while higher levels, at least in Europe, found very little sympathy. Anyone who wanted to stay out of the market did not even bother to offer and left clients with the promise of getting back to them early next year “when everything is clearer”. So some people in the trade continue to build stocks for the “great opportunities” they expect will come in 2013.
One has to recognise that the positive market performance is strictly limited to premium-quality hides and the substitution for the preferred grades from the US. We can point our fingers easily at a number of grades that do not attract any attraction at all, no matter how cheap they look like today. The real strength of the market has still to be proved when it comes to the day when these hides too have to be sold.
Sales this past week were fine and on Friday one could still sell more hides at the prices of Monday if one wanted to. Volumes were enough to clear production, except for the less-favoured grades. So, surplus of demand for good hides and higher weights and less attraction for light weights and less quality. If there was any concern, it was only the interrupted shipping due to the Christmas break in Europe and the shipping interruption due to the Chinese New Year (February 10).
The kill: Cold weather and snow do not normally boost beef demand, but in the north of the country the kill was actually not too bad. We received more hides than we expected and the weights are pretty high too. This coming week is the last full week for 2012 and the kill should be steady.
What we expect: This week there was more activity than we expected, so we were wrong in out expectations. The market has now to show if it is ready for higher prices again or if the activity is just down to the ‘I don’t want to miss anything’ type of activity. Most are betting on a bull market for the first quarter and we have to see how much cash is left in the pockets of the industry to support higher prices. We will not risk anything in 2012 and test the market when the new year opens.
| 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 | € 2,20 |
Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1.90 |
Recovering |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 2.00 |
Difficult |
|
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 |
€ 1.65 |
Recovering |
|
| 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 | € 1.90 |
Recovering |
|
| 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 | € 1.40 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.40 |
Steady |
Share this story:
