German Perspective - 14.01.14
14/01/2014
A number of them continue to be busy and are keeping productions running. Those shutting down early either don’t see any profitability in the business they are doing or they are unable to find the same demand for their leather any more. Most of them hope that after the holidays the situation will be clearer and they will be able to decide what to do in the future. Reduced demand and consumption are keeping the hide market in better balance, preventing prices from rising quickly at the beginning of the year. Many of the international beef producers continue to play the supply card and continue to scare the leather industry with talk of a sharply reduced hide supply. This, in combination with well-managed offer lists, is keeping those tanneries that are in need of constant replenishment of raw material inventories on a high alert. Most of them do not want to run the risk of seeing if the story is true or not.
Actual activity in the hide market in the past 10 weeks has not confirmed any substantial shortage of raw material. This may be because of not enough hides being available, or because there is not enough leather demand to sell more raw material. Whatever the reason, the volume of hides traded has been less than one would expect for this time of the year. From our point of view we see still strong demand from the automotive industry and there is hardly any tanner producing automotive leather, whether high-, medium- or lower-quality, who is not discussing (or even announcing) production expansion in 2014. The growth in this market has to have consequences for others.
The bovine raw material base in total is certainly not changing much. Tanners outside the automotive segment must now decide quickly how they can position themselves when it comes to the direct competition for raw material.
For the moment it seems that the demand for leather for shoes and possibly even handbags might shrink; many tanneries around the globe producing for these sectors are reporting lower orders for the coming season than they had a year ago. Even with the present extreme cold weather in the US, the winter has been reasonably mild and many retailers are complaining about poor sales of winter shoes and apparel. This applies to China and Russia too. Consequently, many tanners are uncertain about their futures and depressed about their inability to raise leather prices just to compensate for the average rise in raw material in 2013.
Whatever this means for the coming months, last week was a pretty normal week for trading. Domestically, across Europe and in Asia buyers were present to replenish some of their raw material needs. Sales were pretty much across the board, from heavy to light and from good to bad. Volumes were good and the numbers compensated for the reduced volumes seen during the holiday season. We know that we are well sheltered by the very bullish tone deriving from overseas origins and this has made our life in sales much easier. However this has not resulted in price increases and this week too we will have a pretty tough job convincing tanners to pay steady money. Everyone is trying to save on the buying side because the selling side will not allow sufficient price increases. As a result margins remain extremely compressed.
The kill: After the very low kill we saw in the first week of the year, numbers recovered last week. We have not yet reached the pre-Christmas levels, and it is unlikely that we will do so. Weights have become a bit lighter, in particular for cows, which is a bit unusual for this time of the year.
What we expect: We would be really surprised if we saw any major price variation for the rest of this month. Currency levels might be a bigger factor than the supply and demand balance in the hide market for the coming weeks.
| 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 | € 2,15 |
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 |
€ 1,95 |
Steady |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,80 |
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 | € 2,30 |
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 | € 1,65 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1,70 |
Steady |
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