German Perspective - 09.04.13
09/04/2013
Most people wondered if there would be any real new trends in leather fashion and articles, but actually very little was seen. The presentation was pretty colourful, but the leather remained very classic and natural. We were hoping to see some new articles that might allow tanners to consume lower selections of raw material, but not much of this was on view.
Some tanners reported that, owing to the problems with prices, some of their customers were willing to discuss the option of not changing leather types but allowing lower selections and to suffer from reduced cutting yields rather than accepting higher prices. In general one can summarise that tanners are still not complaining about their order books, but are highly frustrated about the raw material market levels and the missing correction of raw material prices.
One can feel a kind of fatalism. The leather business is there but is proving to be hardly profitable for the majority and this is not a solid business base as we all know. However, insight and wisdom will not resolve the problem; there might not be a shortage of material on a global scale, but there is definitely not enough raw material in the higher-quality selections to meet present leather orders.
The trade is trying hard to find a solution, but has so far failed to find any. In the meantime the consequences remain the same. Higher asking prices and not enough raw hides to fill the tannery drums waiting and needing them. This trend is increasing because of the increased wet blue capacity of packers and trading activity of wet blue traders. This has been reducing the number of available raw hides already for a while and it has finally had the impact that some of the players were, perhaps, hoping for.
From our point of view this is doing nothing to change the fundamentals of supply and demand, but is amplifying the supply and demand imbalance in specific raw materials and between beamhouse capacity and raw hides available. With more capacity not only in Asia, but also in Africa and expansions in the Americas the situation has become problematic with the strong demand for leather in general. Operators see the demand and see the chance for their capacities to be filled. As long as leather demand has been sub-par and drums had to be idle because of lagging demand, over-capacity was not so visible, but with the rising consumption and popularity of leather, mainly in the emerging markets, the situation has become problematic and it is obvious that we are now at the beginning of the next restructuring process of the leather pipeline.
And we have it all. Finished product brands buying tanneries and packers increasingly becoming tanners has led to a situation in which there is big money on both sides. With both sides being big players it is not an easy conflict to resolve and things are certainly not easy for the smaller, more traditional tanners in the industry.
We found selling this week no longer as easy as before. It is less a problem of demand than an issue of price. Resistance is growing and the first ‘no’ has been heard. Sales were done for some cows and good timing on the currency market made or killed any profits on the deals. With shortened productions because of the Easter holiday, the supply situation hasn’t become any better so there has been no relief on prices, which were steady to a fraction higher.
The kill: The kill is totally okay and in our region it is no better or worse than normal. Conditions are still abnormal, which is good for the kill on one side and bad for farmers on the other. It’s difficult to say when this is going to change. The beef business seems still to be difficult and the beef industry is not really happy. There is no reason to believe this will change in the short term.
What we expect: There are still people trying to push this market higher. For the moment resistance is growing and we don’t see anyone paying more at this stage. Not enough raw material stocks are pressing on suppliers, so they won’t surrender either. The party is not over yet, but with more people getting drunk and tired one has to be afraid, that somebody will throw up eventually. Until then no change.
| 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 | € 2,40 |
Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 2.20 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 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 |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1.90 |
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 | € 1.60 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.60 |
Steady |
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