German perspective - 26.11.13
26/11/2013
The situation has claimed its next victim with one of the famous tanneries in central Europe forced into receivership this week. Although working on reduced capacities for some time, some hides might need to find new directions. Other than that the automotive tanners are where production remains at high levels. With a few exceptions most are working steadily, although an increasing number are reporting shrinking order books and production kept running with the next order coming in. This stretches a few inventories in Europe and outside 'the few' most have almost disappeared from the purchasing market. It seems that most are covered until the end of the year and will only return to the market close to Christmas to discuss deliveries for the New Year.
The essential question is how leather demand and raw material supply match in the first quarter of 2014. For most people on the supply side the position is clear. Supply will diminish and demand will be at least steady and consequently prices can only go one way - up. It seems they will be at worst steady, but certainly not down, and this means most sellers are not even considering bids below the present levels.
One could also take a different view. Leather orders are below levels which would be expected for this time of the year. Many manufacturers are playing with alternatives and the big players have bought enough hides at reasonable levels and can wait until sellers get back on their feet, like in August this year. In spring this year the market had been pushed over the cliff and serious reductions were needed to get the ball rolling again. Maybe this is what many of the large players are looking for - buying volume when the market is right, supporting the market with a bit of ambition to push it higher and to take the benefit afterwards. This would create a scenario of a market setback any time between mid-December and mid-January to push prices high into spring. It would be a decent theory if the leather prices justified it. The truth is, however, that the more prices rise the more leather production is on the retreat.
We saw this year splits that had been enthusiastically entering collections just to find out they face the same problems as hides: not enough and far too expensive. This product can’t be multiplied just because one needs it. Although some orders still need to be covered the demand for splits is slowly declining and it will be interesting to see if shoe manufacturers will consider splits again for the next season.
Trading was light again. Heavy bulls still sell and there are plenty of them around. The rest is a difficult job although on paper the EU hides are still pretty attractive. The demand is simply not there at the present price levels no matter what people put on their price lists. We were able to convince some of the regular buyers that it is better to take little and regular. Interest was mostly for dairy cows at more or less stable prices.
The kill: The numbers remain pretty good and the weights too. Now all cattle is coming to slaughter, which we were missing so desperately in summer. Late tends to be mean heavy. The weather is getting cold and this should keep numbers high. This should not change in the week to come.
What we expect: Trading activity should remain light for some weeks. Towards Christmas there should be another round of sales before the year closes. Sellers will not be willing to discount prices for a while and we don’t see buyers willing to pay more either. All of which points to little trading in narrow price ranges.
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