German Perspective—08.01.13
08/01/2013
Most players start into the year with reasonable optimism. All concerns about the situation in the leather industry and possible financial problems did not appear, which has made suppliers optimistic again for 2013, in particular in view of the expected reduction in slaughter. Fewer hides equals higher prices, remains the logic of the market. More and more tanneries are no longer willing to bear the raw material price risk alone and are trying to find solutions with their customers as to how the raw material price variations can be mirrored in the leather price.
With only a very short-lived price correction they find it increasingly difficult to achieve a workable average price for the raw material in relation to their long-term contracts for finished leather. Leather buyers’ understanding of the need for higher leather prices has been limited and this makes the calculation for tanneries more difficult every day. While one can understand the higher prices for premium materials, higher prices for standard qualities are difficult to explain and justify. This is already reflected in the widening price-gap between top and average quality segments.
We believe that 2013 will become an decisive year in how the price structure for leather will be set for the years to come. If leather prices in general cannot move higher and demand for medium- and low-quality leather doesn’t pick up, it will become increasingly difficult in particular for the remaining tanning industry in Europe, to feed and manage their production capacities. There are not enough good hides for all of them and in the competitive price section they can hardly beat the cost and marketing advantages of their Asian competitors. These competitors do not only enjoy a cost and marketing advantage, but they are also benefiting from rapidly improving finishing technologies, which allow to make good-quality finished leathers, whenever corrected grains are permitted.
With the present outlook in the market it seems that many of the remaining European tanners could have a difficult time in the year to come. Any advantage in being close to the better raw material sources is fading with the consumer markets growing in Asia, shrinking in Europe and the technology gap closing. How long Asian tanners can manage the challenge of high raw material prices and how successful they will be in raising leather prices will also be one of the interesting topics of the first quarter 2013.
The hide business was pretty dull and lacklustre over the past two weeks. Extended holidays and even many Asian players taking several days off weighed on market activity. While Christmas week still saw some buyers fishing around and allowed a few sales, this past week was exceptionally quiet with hardly any reaction from buyers or agents. Maybe buyers are already covered and price levels are not really attracting anyone to chase more hides.
So, it seems that the real opening of the market will only take place this coming week. Whatever interest was obtained was across the board, but in general from shoe upper tanners. They were looking for bull and ox hides or heavy cows, but were not willing to pay asking prices. So, there was very little done and a compromise could only be found for some heifers and dairy cows. Prices were about 2%-3% below asking levels, still more or less on the same levels reached prior to Christmas.
The kill: The kill was very low over the past two weeks. With all the holidays, it was not really a surprise. Also for the coming weeks there is not much indication of an uptick, except as compensation for the missing slaughter days of the previous weeks. Weights are seasonally heavy, but not really exceptional. Also the slaughter mix is not presenting anything exceptional at the moment.
What we expect: In the weeks to come we will see the real start into 2013 and it will be interesting to see what tanners really decide and how they are covered. It will not be an easy decision to buy hides at the present price levels unless you are forced to do so. If we look at our shipping programme for the coming weeks and considering the Chinese New Year break in the first half of February, most tanners in Asia must be reasonably well covered with raw material arrivals after mid-February. How much appetite they have for more purchases at stable or higher prices will possibly depend on the reaction of their leather buyers in discussions about higher leather prices. For the week to come we don’t expect any major market movements. Packers may try to push again, but this is more about politics.
| 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 |
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 |
€ 1.65 |
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 | € 1.90 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.75 |
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:
