German Perspective - 09.07.13 - leatherbiz: Lea Leatherbiz

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German Perspective - 09.07.13

09/07/2013
What happened this week: Slowly the market is shifting into holiday mode. Although most of the European tanners close for their vacation towards the end of July or in August, one can feel that most are already thinking about the holidays, the maintenance programmes that need to be run, the preparations for accounting and labour, and the discussions about what has to happen after the holidays. The only ones still in full gear are mostly the automotive tanners who are still chasing every single hide suitable that they can lay their hands on. And if they are having to grab every single hide they can lay their hands on in the low slaughter season, they are running at full capacity. This will most likely last until the kill gets better in the last quarter of the year.

For the rest of the market, the situation remains as complicated as it has been for weeks if not months. Asian buyers in the majority are still struggling to open letters of credit in time, and many are way behind the schedules with all kinds of excuses: from licence problems to slow banking administrations; from inventories being too large to excessive arrivals. Nobody is actually failing yet, but it is pretty obvious that leather orders have not been what tanners expected and their raw material purchases from April do not match the leather orders of July and August, so inventories are lasting longer than expected.

The credit crunch which is still strongly denied by the Chinese authorities is also playing a role. In the end, many have now got what they were looking for: a slowly and gradually falling market with the only problem being that hardly anyone knows if the modest decline is actually backed by enough volume to ease the selling pressure a number of suppliers around the globe still have.

It is a fact that more hides are on offer from various sources than for a long time and this means that either the regular buyers have no need or are simply not willing to pay the prices the suppliers are looking for. If you don’t succeed with your normal outlets you look for new ones. This is clear proof that selling hides has not been as easy as many have been pretending for some time. If the information we have and our interpretation are correct, then it is mainly the furniture upholstery business that is lagging behind budgets and plans. The footwear business still seems to be reasonably intact but still not as good as many had expected, and with the rising cost of production and the rising problems with pollution controls and finance in China, many have had to become far more sensitive to what and how much they buy these days.

In general it seems that there is no fundamental need to purchase hides in the volume normally seen for the start of the busy production season in mainland China. Many customers state also that they can still buy more cheaply from local importers trying to reduce stocks than directly from source where everybody is still trying to hold prices steady. All this is not really an environment that is creating too much faith for the weeks and months to come.

Sales activity this week was slow again. It is also difficult to negotiate with customers who are already behind schedule now. What is the value of a sale to them for August if May shipments are still pending? Whatsoever, interest this week was focused on the cheaper hides again. Low grades and lighter-weight cows could be moved with moderate discounts. The firmer US dollar helped a little to bridge the bids and the asking prices, but was not enough to compensate in total. Sales volumes were a bit better than in the previous weeks, but still not what they should be to build real confidence. In particular we are missing any interest for the lighter end of the male section. So, sales were mostly for dairy cows at a few dollars below some weeks ago and below asking prices.

The kill: Although our region is already in full holiday mode the kill is still pretty steady. The cattle count in Germany showed a decent rise in males and a pretty steady level of cows. This lets us believe that the slaughter for the rest of the year will not be as poor as many have predicted.Weights have seen their seasonal lows and will stay at current levels for a while now.

What we expect: The market is still stuck, but the first cracks on the price front cannot be denied. This may exclude automotive hides, but for the rest one has to accept it. We are now awaiting the results of abattoir buying and this will then dictate if price adjustments can be expected for August and September. There are still a lot of conflicting interests and the packers will not easily surrender; they will fight hard against the necessary readjustment of abattoir prices.


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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