German perspective - 1.10.13
01/10/2013
With the end of the summer holidays, September is generally the time to figure out what the leather demand is going to be in the winter semester, which proved a bit difficult because there continues to be a conflict between the function of leather as a material. Many of our buyers are reporting that demand has declined due to substitution or they have pulled out of the production of certain articles which were no longer profitable – although this is hard to quantify.
Demand for top-quality hides remained unchanged while the demand for the medium and lower-end hides began to fade. It started with the absence of buyers for light weight bulls, which shifted slowly into light cows and moved to the rest of cows and low grades as well. Nothing rough, nothing sharp, nothing quick, but a fact which couldn't be considered a surprise, because prices in the US came down and the USD lost some of its value which made North German hides slowly but surely too expensive.
So, every sale became a fight with the exception around the Shanghai fair when a flurry of interest and sales interrupted demand for a week or two. However, existing contracts and the reduced number of sales were enough to avoid building too many unsold stocks and the fierce competition for high-quality material continued to give the butchers the upper hand and allowed them to prevent any decline of prices at the abattoirs – quite the reverse; in some cases prices increased. This prevented the European market from making necessary adjustments and so it continued to price itself out of the international markets for the majority of the articles. With the recent rebound in demand for hides in the US and the beginning of the new production season, prices could get back into the range.
For this week, general activity and demand from Asia was pretty slow. None of the regular business was seen. This possibly means that buyers’ focus remains on other hide origins which continue to look more attractive for standard leather production.
Light weight males are still too expensive, and we did not have any interest for dairy cows, although they seem to be the most competitive ones. This left the interest and demand just for low grades where the price negotiations were pretty complicated. In the end, price concessions had to be made because it was proved that others had surrendered before us.
In Europe, business was pretty normal for heavy bulls and due to the repetition of regular programmes the number of sales was reasonable and better than the general sentiment. However, the general level of prices and the wide range between the various EU origins worry many clients and the first ones have pulled out of their preferred sources - whatever their alternatives may be.
It was a week of mixed emotions, with rising activity in leather production but with a price structure between the articles and origins which does not reflect the real value of the raw material in leather production.
The kill: The kill continues to get better. It seems that many farmers are now taking the chance to take some of the good cattle prices with beef demand rising seasonally. The higher numbers ease a lot of the supply strain which we had seen over the summer and fresh hide supply planning is getting a lot easier. With the nights getting colder the slaughter should be good in the coming weeks.
What we expect: The next weeks should be a bit quieter. In Asia, another week of holidays has arrived and many are preparing for the next leather show in Bologna [Lineapelle] next week. It seems most tanners have covered their needs for the coming weeks. It will also be interesting to see if the rising purchases from overseas by EU tanners will have an effect on local demand. The weaker USD and the price levels in general have made purchases attractive although one has to wait for the arrivals a little longer. Better kills will ease supply problems too.
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