German Perspective - 19.03.13 - leatherbiz: Lea Leatherbiz

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German Perspective - 19.03.13

19/03/2013
What happened this week: We are finishing another week of limited activity, at least as far as the general market is concerned. The heat and the excitement continues to come from the automotive market and this means again, all is about heavy and high-quality male hides. There is presently another war going on at the abattoir doors and prices continue to shoot up and to please the butcher. Most players are scratching their heads to understand why this is happening.

Despite the fact that the automotive industry is painting a reasonably rosy picture for the sales of luxury cars and the premium brands continue to report extraordinarily good export sales, it remains difficult to understand why prices have seen such a strong rebound after the correction in the final quarter of the last year. As usual, one side is accusing the other and the real trigger can hardly be found. The main problem is the fact that the strong performance of this small and limited market is dragging the price for the rest of the hides up, although dairy cows or other standard materials have very little to do with the high added-value material in the automotive industry.

There is, however, very little that can be done at this stage and March is traditionally a pretty difficult month, with the tanning industry finishing their winter seasons and some of the major leather fairs ahead of us. Most suppliers still do not like to travel to the trade shows and their overseas customers empty handed, no matter at what price the hides had been bought.

It will certainly interesting to see which is going to be the winning team of those who were supporting the idea that the market will continue to be supply driven all against those who believe there is still a ceiling to prices (and if this limit is surpassed demand will decline and bring prices and the market back into balance). For the moment, people are digging in their heels and it seems more than likely that it will take possibly another month to understand where we are heading.

Trading and sales this week have been limited. The traditional male hides supplies on long-term contracts have been renewed while the interest and the bids from Asia have been pretty slow. Prices went up moderately for bulls while the bids for cows were just steady and only the moments when the euro was weaker allowed them to take a little more money home.

The recent indications that the US economy might be recovering could have prompted some optimism throughout the trade. However, all the excitement cannot hide the fact that less prestigious raw materials find far less attraction in the market. Average and lower-quality raw materials can hardly take much benefit from the strong performance of some selected hide types. If one looks just at the real value of hides, the spread between prices can hardly be justified.

It is still pretty surprising how limited the flexibility of many tanneries and leather users is to react to unfavourable individual price trends. We found interest this week pretty slow with the only exception of heavy bull hides, as we have explained above. Asian tanners seem to take the position that they want to see their raw material suppliers before taking any decisions. They are also possibly awaiting their leather buyers to understand if leather demand is strong enough to allow them to increase leather prices according to the higher raw material levels they have to pay from quarter to quarter. We should also not forget that the second and third quarter generally see changes of the season and also a certain decline in leather production versus the winter quarters. This all indicates that we are heading towards the final clash of opinions in the weeks to come.

The kill: Despite pretty poor weather conditions, the kill in our region had been a bit better again. The upcoming Easter season may be the reason for it. Weights are already on the decline and we hope that the reasonable numbers after the horsemeat scandal will continue to be stable.

What we expect: Actually, we have no idea what we have to expect. First of all we have to try to compensate for the price levels at the abattoirs and to understand from the trips what we have to expect for the leather business in the coming months.



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

€ 2.25

Steady
 

25/29,5 kg

27,5/28,5 kg

22/27 kg

25/26 kg

€ 1.90

Steady
 

30/+      kg

33,5/35,5 kg

27/+   kg

29/31 kg

€ 1.85

Steady
Bulls 25/29,5 kg 27,5/28,5 kg 22/ 27 kg 25/26 kg € 2.40
 Steady
  30/39,5 kg 36,0/37,0 kg 24/34 kg 31/33 kg € 2.10
 Steady
  40/+     kg 45,0/48,0 kg 34/+   kg 38/40 kg € 1.90
 Steady
Thirds 15/+      kg 25,0/27,5 kg 13/+   kg 24/26 kg € 1.55
 Steady
Thirds bulls 30/+      kg 38,0/40,0 kg 24/+   kg 33/36 kg € 1.50
 Steady



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