German perspective – 21.5.13
21/05/2013
The problem in periods of major change is the fundamental positions of the players. The market is not reflected by the activities of supply and demand anymore, but by the intentions and positions the players have. This is not an easy situation. Although the tanning industry wants and needs downward adjustments in raw material prices, hardly anyone in the market place is seriously looking for a sharp and quick reaction. The main reasons for this are the risk for leather prices, the (expensive) inventories many hold and the outstanding contracts of expensive raw material which still need to delivered – and paid. That makes it all a bit complicated and as usual in our trade people are now trying to 'talk' the market rather than to 'make' it. Sellers are still using supply and slaughter as the argument that the prices can hardly move and tanners try to reach the shore of the season without big prices changes - but do not support this by major purchases.
While in the US prices are officially sliding moderately week by week (or possibly even a bit more, unofficially) European butchers not willing to manage the market and prices pro-actively and prefer to squeeze the last drop out of it before possibly facing a major correction which could then become uncontrolled and cause the market far more problems.
Again we have to stress that this applies only to a part of the market. For heavy, high-quality automotive hides demand is still strong enough and pending contracts are still extended enough to sustain the levels within a small price band for some time. Consequently, the local market needs to be sorted out for the hides which are below 40kgs and which do not qualify for superior quality.
The gap between the international levels and our prices is substantially widening and has to and will be closed eventually. We see the price difference today between 5% and 10 % depending on grade and type and the levels you compare with. This implies no further price reductions, which are on the horizon in other markets, or significant changes on the currency market.
With all the price problems at least the currency market was favourable – if one could sell. The USD was climbing throughout the week and was at least helping a little to close the gap of valuation between the EU hides and their competitors in Australia and the US.
The biggest problem from our point of view remains, however, the financial side of the business. Whoever you speak to starts finally to admit that the payments are the biggest problems. Clients without credit insurance and/or questionable reputation have to pay upfront and need to count their money before buying. Open credit sales are falling way behind schedule and the majority of overseas buyers are as well not opening their L/Cs according to the intended shipping schedule but with serious delays. From China, one hears everyday about a large part of the tanning industry suffering from late payment of their customers or inventories which cannot be delivered because clients are stuck.
Sales this week were moderate. Bits and pieces mainly for low grades and some dairy cows were dominating while in Europe most of the interest was still focused on the heavy end. Prices were stable for heavy bulls but fractionally – ie USD 1-2 – lower for cows. However, interest was scarce and one cannot find any big interest for hides. Upholstery was, for the first time, said to do better in Asia than shoe upper which had been the trendsetter for so long. However, upholstery tanners are far more price conscious than the side leather tanners had been.
The kill: The kill is still according to the season. Numbers are down and in particular males suffer because of the poor sales of the premium cuts. The number of cows in the slaughter mix are surprisingly high, although the weather is favourable and milk prices are not too bad either.
What we expect: It would need a real surprise if the market can escape from the pressure, particularly considering that EU hides look expensive now. We need a correction at the abattoir door and a pick-up of sales to get things straightened out. Consequently, we believe in the persistence of downward adjustments.
| 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 |
Pressure |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 2.30 |
Pressure |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 2.00 |
Pressure |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1.90 |
Pressure |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2.40 |
Pressure |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2.30 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 2.00 |
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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