German Perspective - 19.11.13 - leatherbiz: Lea Leatherbiz

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German Perspective - 19.11.13

19/11/2013
What happened this week: The situation is pretty much the same all over. The high prices are slowing sales down and the shelter we got from high prices in the US is beginning to fade. There are two types of clients around at the moment. Those who bought good volumes in late summer and are now feeding their productions with these lower-priced hides, and others who did not have the courage to take such a position and now need to buy hand-to-mouth just to keep their productions rolling, even at a loss. However, even some of the tanners who have still enough hides in store are buying bits and pieces and in many cases one has the impression that this is less a question of need and more an attempt to protect the current levels of leather contracts and inventory valuations.

Even with some business still concluded we are facing, like everybody else, a significant resistance from buyers. Except for the regular and steady interest from EU automotive tanners, all other buyers are reducing their order volumes and are negotiating pretty hard on every price asked.

The US dollar fell again during last week but did not offer any further tailwind for our calculations. Reports from the leather business are generally confirming a sharp reduction in orders for shoe leather and with the holiday season approaching fast, players are beginning to plan their holidays.

Also this week a good number of letters of credit came in, which means there will be a good final round of shipments before the break due to the Chinese New Year holiday at the end of January. Shipping lines are already restricting shipping space and limiting the numbers of vessels going to and from Asia.

We find it extremely worrying that an increasing number of sources are reporting a substantial decline in orders for shoe leather in China. While everybody is still talking about the growth in the production of automotive leather, it remains to be seen if this will be enough to compensate for potential declines in shoe leather in the first quarter 2014. In the meantime one can clearly sense the shift towards cheaper raw materials. With the price levels reached again the volume of sales is fading and, like in spring, the prices have been overshooting and the number of buyers willing to purchase at loss-making prices declines by the day. What this will mean for the market towards the rest of the year will be interesting to see.

Considering, that letters of credit came in slowly in October and have gained some pace now so that hides will arrive in Asia before Chinese New Year and allow tanners to start production from stock in February, it would come as a surprise if the hand-to-mouth buying were to continue until the end of the year. Volumes of sales might continue to be well under par.

Sales were just about reasonable this week. In the end we could place the standard premium grades without too much hassle while dairy cows were pretty hard to move. Tanners were not willing to pay the asking levels or take full quantities. Prices were steady for heavy bull hides, but barely steady for the other grades due to the fall of the US dollar. Low grades, although small in volume, were the only ones making a little progress in prices.

The kill: The kill is totally stable. The peaks are behind us, but the numbers are reasonable and this should now continue until Christmas. Weights remain heavy too and so the supply side remains at what one expects at this time of the year. The slaughter mix is still seeing a good proportion of males.

What we expect: We mention above what we expect. It seems that purchasing activity is slowly decreasing week by week now. Using the calender and looking at the shipments, tanners might not need to bother about purchasing for some weeks and it may be mid-December before people need to take decisions for deliveries for the end of January and February. We shall see if this affects suppliers, but for the moment we think the market is pretty much stuck with tough selling for the moment.

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 € 2,50
 Steady
25/29,5 kg 27,5/28,5 kg 22/27 kg 25/26 kg € 2,20
 Steady

Dairy cows

15/24,5 kg

22,5/23,5 kg

13/22 kg

20/21 kg

€ 2,25

 Steady

25/29,5 kg

27,5/28,5 kg

22/27 kg

25/26 kg

€ 2,10

Steady

30/+ kg

33,5/35,5 kg

27/+ kg

29/31 kg

€ 1,85

Steady

Bulls 25/29,5 kg 27,5/28,5 kg 22/ 27 kg 25/26 kg € 2,30
 Steady
30/39,5 kg 36,0/37,0 kg 24/34 kg 31/33 kg € 2,35
 Steady
40/+ kg 45,0/48,0 kg 34/+ kg 38/40 kg € 2,20
 Steady
Thirds 15/+ kg 25,0/27,5 kg 13/+ kg 24/26 kg € 1,60
 Firmer
Thirds bulls 30/+ kg 38,0/40,0 kg 24/+ kg 33/36 kg € 1,70
 Firmer


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