German Perspective—05.02.13 - leatherbiz: Lea Leatherbiz

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German Perspective—05.02.13

05/02/2013
What happened this week: The week started with everybody talking about higher prices, and the central European trade preparing for the next round of abattoir buying under the impression that only one thing can happen: prices will go substantially higher. As the week progressed and the US dollar fell, initial courage started to fade. Independent of the firm market overseas, the steep fall of the value of the US dollar and the strong recovery of the euro are taking little by little away from the calculations of export sales. This applies not only for hide exporters, but also many tanneries will feel the pain with a good proportion of European tanners selling in US dollar areas. Taking a rate of $1.40 to the euro into consideration we are back where we were some time ago. European hides look even more expensive than they did and without the other overseas origins rising further in prices it will be very difficult to justify the present levels in euro on the export markets.

Asian customers have already packed up with just some office staff still active, trying to handle administration and to obtain payments or letters of credits before the shutdown for the Chinese New Year holiday. A few buyers were still sniffing around and some people were even pushing hard for offers. However, when they saw that prices were higher and rising due to the currency rates they all stepped out and left their interest open until their return from the holiday break.
Many Chinese tanners have also taken the chance to travel before celebrating the Chinese New Year holidays with their families back home. In particular the countries in the southern hemisphere saw a lot of customers. However, also Europe got its portion and this is possibly mainly related to the better shopping options in our part of the world. Anyway, the trips were combined with visits to suppliers, checking if their warehouses are full or empty, checking if there is an opportunity to grab a bargain, but also to confirm that the outlook for the leather business in China remains reasonably positive for the first half of 2013.

So far so good. They have been buying raw materials, even in the rising market, but a lot of their margins have been taken away in January by rising raw material price levels. Their worries are that paying today’s price levels and seeing the containers arrive in late April or May could mean that these hides will become pretty expensive if anything happens to the market trend. Everybody knows that one day the party will be over and prices paid a few months in advance could look pretty expensive.

This makes the analysis of the European and the Asian markets totally different. The different shipping and lead times make a difference. Asian tanners today are covered for raw material supply for the coming six or eight weeks. But Europeans still need to fill the drums for the coming weeks and they are more the driving force behind the market sentiment in our region today. Packers are still playing the supply card knowing that the first two weeks of February are never very busy because of the Carnival season and they are pressing hard for higher prices. It will be extremely difficult to make them change the positions they have taken already and it seems that this situation applies Europe-wide.

Sales this past week were pretty limited. The first two days of the week saw good interest from Asia mainly for cows, but activity faded as the week progressed. In Europe sales were hindered by the uncertainty about abattoir prices. Consequently, it was not a very active week and prices in most cases were steady at the higher levels already reached. Only premium hides can still command the prices asked for. Bulls of good quality are still in short supply, but also veal skins remain totally unaffected by any potential future risk. Prices were higher in Europe for males and barely steady in the end for cows overseas.

The kill: The kill remains reasonably steady at low seasonal levels. Maybe this coming week we will still see some reasonable numbers, but the week after will be seriously affected by Carnival. In many parts of the country we will miss almost half a week’s production. Weights still remain below normal seasonal averages.

What we expect: The next weeks are supposed to be reasonably quiet overseas because of the holidays. It doesn’t seem that clients are desperate enough about buying to chase offers during their vacation. In Europe we still see the need for renewal of regular contracts and discussions will mainly be driven by the reduced slaughter. In the coming weeks it will not be easy to fill all the drums waiting for material. However, the new situation in the currency market needs attention and possibly a week or two to be analysed and digested.


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
 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

€ 1.80

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 € 2.05
 Steady
  40/+     kg 45,0/48,0 kg 34/+   kg 38/40 kg € 1.85
 Firming
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




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