German Perspective—29.01.13
29/01/2013
The kill in our region has dropped considerably in the past weeks and some tanners have realised that managing a just-in-time delivery programme is not always the right policy for feeding drums that need to turn. It is the old story in Europe: everyone is looking for fresh hides of certain types, but the numbers are only available when the beef sales allow to run slaughter plants at acceptable levels. Tanneries that do not hold sufficient salted material buffers are facing supply problems after kill numbers dropped. For overseas business the problem is less dramatic as there is more time to manage and to deal with quantity problems and raw material inventory can always be kept with suppliers as well as on the customer’s side. In any case it has become pretty difficult to manage supplies. There will be a certain easing of the problem with the upcoming Chinese New Year holiday.
Overseas shipments will start to slow down a bit and the upcoming season of Lent (beginning February 13) will reduce the kill with a good number of tanneries also slowing down production for a few days around Mardi Gras and the Carnival season.
Independent of the problems of physical supply and demand, the number of people starting to become uncomfortable with the present price levels is rising. Although there is no failure in the industry, the number of delays in payments is constantly rising. Many suppliers are closing their eyes and hoping for the best, which has worked in the past so could work again in the future. But would anyone really be surprised if money became too short eventually?
From the leather business one cannot obtain much news at the moment. Many large brands and retailers are presently trying to figure things out and are discussing with their suppliers and manufacturers about orders for the winter 2013-14 season. The automotive industry continues to gain optimism, but also needs to decide how it is going to equip and to attract customers for coming models. Interiors and accessories are becoming more important and as we all know they can be but do not have to be made from leather.
However, with fears about the global economy fading, some optimism is returning to the leather industry too. However, with the raw material price levels we have reached and most other production costs also being high, worries remain about the future. Can leather obtain in the market the prices needed to make production profitable and how can the imbalance in demand for top-quality products and rest be equalised?
Despite the high prices for many raw materials, there are still a lot of cheaper materials around that are not attracting much interest. Looking at the spread of prices between many raw materials one can trace some that would appear undervalued if the leather industry could be more flexible and if leather as a material could find a similar level of demand for it as there is for higher-quality material. If leather performs in total there are still a lot of resources to be used.
Sales this week were pretty subdued, mainly due to a mix of reduced offers, but also due to less demand at higher prices. There were still bids around at similar levels to those of a week ago, but with the lower level of the US dollar the returns were not attractive. So, those selling fresh hides in Europe were seeing better interest due to the shortage of production. The Asians got a bit tired of the endlessly rising weekly asking prices and were not very busy this week. Selling numbers were consequently well under par and prices just about steady.
The kill: The decline of the kill continued this week. It is a bit unusual, but beef sales seem to be no good all over because of the low slaughter levels at the moment. It seems that the levels will remain still low for some time and weights are low too for the time of the year.
What we expect: It seems we are now heading into some lower activity. Asian are leaving for their holidays and do not give the impression that they will rush for more at the moment. Suppliers will take it pretty easy, looking at the reduced kill and and the consistent demand seen over the past months. Consequently it makes us believe that we will see higher asking prices, but not much response to them, and this means slow business at steady levels.
| 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 |
€ 1.80 |
Steady |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1.70 |
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 |
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