German perspective - 23.07.13 - leatherbiz: Lea Leatherbiz

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German perspective - 23.07.13

23/07/2013
What happened this week: Europe is in holiday mood and there is just a final flurry of sales for the time of the reopening after the summer holiday. Nothing new from the standard markets. Whatever is available in heavy and good-quality material is still immediately absorbed as quickly it is offered. With the low kill it is still pretty easy to hold the market steady for these types of hides. The rest is exceptionally quiet, and makes it pretty difficult to define a market level. Many suppliers are still pretending their business is good enough to justify to hold prices steady. However, butchers are pretty reluctant to see the writing on the wall and to adapt to the international price levels the European raw material suppliers have to deal with. It is interesting that everybody is just speaking about the grades which are selling easily and can still obtain their price tags and nobody is willing to discuss the general trend in separation between the premium materials and the standard products. For a while now those markets have been moving into different directions, which is demonstrated by the fact that lower priced and more economical origins are growing their exports, while from the more expensive origins, sales for standard products have been slowing for some time.

With the start of the next new leather season from September we will all definitely understand what we really have to expect from leather prices for the coming season. With another round of adjustments for the standard products it will continue to be extremely difficult to justify the price levels we have reached in the first half of 2013.

So far, many tanners have been trying to avoid overvalued raw material by downgrading the raw material and this is, in our case, means favouring dairy cows for shoe upper production. The interest for male material up to 40kg has been fading week by week and with the present price levels internationally and the price levels we are dealing with at the abattoirs in Europe it is impossible to generate any kind of interest for this kind of material on the international markets.

This continues to leave us with a widening price gap between the hides suitable for automotive leather and the hides which are predominantly used for shoe upper and upholstery material. There is a pretty obvious shortage for automotive hides and with the low summer kill this problem cannot even be balanced by the shutdowns due to the summer holidays. Consequently, automotive tanners need to enlarge their priority list of raw materials and this is leading to an overvaluation of other standard heavy material origins.
So, more heavy male hides are going to automotive tanning and day by day other are tanneries are shifting to more economical alternatives. While this is pretty supply-driven the chances for any kind of easing and correction is limited to the times when the regular kill increases, probably from the second half of September onwards. Until then we are heading towards the peak holiday season and the 'for arrival after the holidays' business will now fade quickly. Many tanneries are closing their doors next week and soaking is faded out from the middle of next week onwards.

Trading this week has been pretty quiet. Total numbers have been boosted by some renewal of long-term contracts, but the 'free market' activity has been quiet. Asia hasn't been active at all and not even dairy cows were as keenly sought as many tried to say. If there was anything positive this week, it was the receipt of a few more L/Cs. Prices were within very small ranges but pretty steady.

The kill: Low season and low weights. For another two to three weeks the kill will just be minimal and by mid-August we might see a little uptick here in the north. Further south it might still take until mid September before a real recovery.

What we expect: The market is still not ready for any major correction. The upside is very limited if at all an option. On the downside there are too many political reasons why we cannot really expect anything serious to happen during the peak summer season. We continue to believe that a 5%-10 % adjustment would be the best alternative and a good basis for the start of the next leather season. We will see the demand for leather sliding if the prices do not adjust and make leather as a whole attractive again. So, short term not much is going to happen as far as prices are concerned.


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 € n.q.
25/29,5 kg 27,5/28,5 kg 22/27 kg 25/26 kg € n.q.

Dairy cows

15/24,5 kg

22,5/23,5 kg

13/22 kg

20/21 kg

€ n.q.

25/29,5 kg

27,5/28,5 kg

22/27 kg

25/26 kg

€ n.q.


30/+ kg

33,5/35,5 kg

27/+ kg

29/31 kg

€ n.q.

 
Bulls 25/29,5 kg 27,5/28,5 kg 22/ 27 kg 25/26 kg € n.q.
30/39,5 kg 36,0/37,0 kg 24/34 kg 31/33 kg € n.q.
40/+ kg 45,0/48,0 kg 34/+ kg 38/40 kg € n.q.
Thirds 15/+ kg 25,0/27,5 kg 13/+ kg 24/26 kg € n.q.
Thirds bulls 30/+ kg 38,0/40,0 kg 24/+ kg 33/36 kg € n.q.





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