German Perspective - 27.08.13
27/08/2013
In June and July people are longing for a holiday and a break from the daily production routine, but after a number weeks of the phones ringing less and the number of emails significantly down, people become desperate to know how the business is going and for the restart after the break. With the winter semester being the busier one, every one wants to know what can be expected from the leather industry. What could be better timing than having a large fair at which most of the global industry has the chance to meet and discuss the market situation?
The situation is different at this time of the year. Normally suppliers would try to go into such event with a solid sold and strong negotiating position. Not this time. Many are either sitting already or seeing unsold inventory in their sales positions. And with the declining leather demand of the past months suppliers have had to realise that the hides they produce are not being absorbed by the tanneries of this world in the month to come. Not only, that some old and expensive contracts still need to be taken into account and for a long time already sales and shipments have exceeded the present production of leather. This is certainly related to the negative margins tanners have been generating with the raw material prices the markets had reached at the end of the first quarter. What we know now is that tanners bought less as a consequence. What we don’t know is by how much their leather orders will decline in the coming six months.
High-end producers are still busy and supply there is not exceeding demand; it’s possible demand is still exceeding supply in this segment. However, even in this section all the research and development departments are working hard on new articles, better technologies and high-end finished goods brands and retailers are running projects to prevent ever-rising raw material and leather prices from affecting them too much.
The weak performer at the moment is the biggest consumer of leather. The shoe sector is presently the one with the weakest performance and the highest price sensibility and has followed the upholstery sector. Demand never stops and hides will always be sold, but the market still runs in cycles.
Sales this week were better and interest was waking up but mostly for dairy cowhides, which are still considered to be the cheaper alternative; males up to 40 kilos are the biggest problem. With the decline of the US steer market they are so far out of the price range that there is hardly any interest at all. Heavy cows are selling much better than light ones and the question is now if the steers will depress the cows or if the cows will stimulate the steers eventually. For this week sales were still not enough to clean up any of the backlogs. Next week we have to see if there might be some more buyers out trying to bargain-hunt before ACLE, or if buyers will wait to see how sellers prepare for the show.
Independent of the market, the money side of the game remains a major problem. For many, cash flow has become a problem, while in China the financing of SME enterprises is a big issue these days. All this has created a difficult environment with the level of caution rising and tanners being highly uncertain about when the time will be right to step back into the market and what the price levels for leather will be in the next season. As long as these questions are open it is difficult to predict when sales activity will return to normal levels.
Sales this week were acceptable, or even good for dairy cows. For the rest, not much interest was detectable, while fresh hide programmes are continuing at regular levels. The weak US dollar is still weighing on revenues; a minimal correction in abattoir prices is still far away from the levels required to match market realities.
The kill: This week the kill recovered a little and we might have left the lowest levels of the year behind us. It will be another two weeks before the holiday season has finished all over the country and by mid-September we should start the high season. We hope weights will increase to make calculations a bit easier.
What we expect: It’s difficult to project anything for the coming week. Generally we should expect a quiet week with most people departing for Asia and waiting for the meetings around or at the show in Shanghai. However, who knows these days? Tanners will have to take decisions soon and will have to start the season with a certain level of prices for their calculations and stocks for the production.
| 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. |
Weaker |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € n.q. |
Weaker |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ n.q. |
Weaker |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ n.q. |
Stable |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ n.q. |
Stable |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € n.q. |
Weak |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € n.q. |
Weaker |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € n.q. |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € n.q. |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € n.q. |
Steady |
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