German Perspective—22.01.13
22/01/2013
The steady market has got the majority of the clients to open their letters of credit in time, prior to the Chinese New Year (February 10). That is really making things much more comfortable because at the present level an interruption to shipments would be the least one would look for. A lot of the general caution the trade had starting into 2013 is fading now and many are convinced that the first quarter of 2013 will see a similar performance to those of previous years: steady demand and steady shipments with generally rising prices. This is not good news to the ears of the tanners.
Prices (at least in USD) are starting to climb back to the levels of last summer and in some cases we have already surpassed those levels. The discussion of the day is consequently how the tanning industry is going to handle prices as, in the end, everything depends on tanneries being able to operate profitably. Until then we continue to wait for the survival of the fittest and to check if the market really is as under-supplied as many try to make us believe. The question remains if there is a general shortage or just a partial one for some types while others are just dragged by the mood and speculation. Time will tell.
In the meantime we have to realise that the dominance of China in the market continues to grow. The mainland is the driver, not only motivated by its large tanning capacities but also by the strong performance of the domestic consumer market. Optimism about the Chinese economy and a positive outlook are taking more and more hides from the market, reminiscent of a similar situation in the wool market many years ago or the lamb and sheepskins market in the first quarter 2012. It is the logic of all bubbles, that before they burst nobody can imagine that it will happen. It is the logic of bubbles, too, that there are no rational facts as to why they should burst until it happens. If one believes in bubbles in the hide market then the above applies to the present situation. Supply is said to decline, demand is supposed to go up, inventories are considered to be low. Is there anything that could break the back of this market? No, in the mind of most players.
If one looks at the average prices of 2012 and at the prices at the start of 2013 and add the expectation that prices will continue to go up, the average price of 2013 is going to be higher than that of 2012 and it becomes pretty obvious that all this can only work out if leather prices rise by minimum $0.25 per square-foot, or in some cases even by double that depending on the raw material. What that means is that we are trading hopes and expectations more than ever before. On a low price level this wouldn’t even be worth a mention, but with the levels we have reached so far it is at least something to watch.
Apart from the international trends, our markets are again driven by the usual production cycle and the need of tanners to fill their drums with fresh hides. With the seasonal high kill in the last quarter and the cuts of production due bad news from the auto industry, prices corrected. All this is now wiped away with lower seasonal slaughter and all the positive news from the same auto (premium) manufacturers. So, we have the same story again. More money doesn’t buy more hides.
Sales this week were regular. The market is still picking up whatever is offered. Prices were a fraction higher in dollars, but due to the stronger euro it had little impact on revenues in local currency. Prices for males in Europe rose, but there were major differences between what packers claim and what has really been obtained. It depends on the item; the strongest performers are still the extra-heavy, top-quality hides. Sales were pretty much for everything; from low grades to heavy males everything that needed to go was cleared.
The kill: The kill this week was normal until midweek and then fell by quite a bit. This time of year is always unstable and variations are normal. The end January and beginning February always sees a downturn in slaughter and it doesn’t seem that 2013 is any exception. So, we plan for lower numbers in the weeks to come.
What we expect: We got our answers this week. China stayed in and only a few concerns were seen. Buyers love to own product and as long as their wallets allow they keep on going. The bubble continues to be blown up. Possibly the rise in prices will slow down as we are now entering the last week prior to the Asian holidays. Let us see if and how quickly the offers of the coming weeks are absorbed. With hardly any sellers considering less money and most probably asking higher prices, we will see how far things move in this coming week.
| 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 | € 2,30 |
Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 2.00 |
Firming |
|
|
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 |
Firming |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2.15 |
Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.95 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.80 |
Firming |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1.40 |
Firming |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.40 |
Steady |
Share this story:
