German Perspective - 25.2.14
25/02/2014
This does not apply to everyone, and the larger and more industrial players keep on going, but for the medium players this can now be seen clearly. The assumption that the larger players are supported by the suppliers as far as sales and prices are concerned can also be seen clearly. Those which are not members of these particular supply chains determined by size or in the high-end luxury business are having a difficult time securing enough raw material at prices that are workable.
However, in general, the shift away from more expensive origins towards the more economical ones can be seen in the price trend of the past month and the general demand for more economical materials. Tanners are struggling with calculations and generally this dictates shift into cheaper raw materials, at least as long as they remain economical.
In general, most suppliers around the globe are still trying to play the supply card. There might still be a pretty good clearance of the standard articles, but it is pretty obvious that around the edges of the menu list, hides are beginning to pile up and those that are not related to the large industrial supply chains or are cheap begin to become a burden for the producer or shipper.
The number of unsolicited offers is certainly increasing and this means that not everything that is produced can be sold easily. This is definitely different to the situation in most of 2013. In particular, the light material which is not high-end is suffering most and this is something new considering the massive demand for veals and kips of the past. Only the top qualities are doing well while the others are struggling to attract any buyers. This is something to think about for those who are pretending that there is a general supply issue of bovine raw material in the global market.
The hides that cannot find a home in the large industrial production are beginning to face more and more headwinds, because their normal users – the smaller and less volume-oriented tanners – are finding business and profitability increasingly difficult, and after having had a look at their 2013 results they are far less enthusiastic to continue on the bandwagon of the raw material market.
All this seems to mean something fundamental for the first half of 2014; at least with only a few weeks to go before the trade meets in Hong Kong [for the Asia Pacific Leather Fair, March 31 to April 2]. It's going to be very interesting to see what this all is going to mean for the price structure in the raw material market. Will the declining prices of alternatives have any effect on the pricing of the standards?
Business this week has been reasonably quiet again and it took a bit of work to convince buyers to take some of their regular product and to pay steady prices. Most people interested in any hides this week were trying to bid the market down. The only exceptions were low-grade hides which continue to see good interest at even moderately rising prices. Customers hoping that they will fulfil their hopes of a cheaper product will have to decide after the material is tanned.
Since the resumption of activity after the Chinese New Year holidays, openings from China are significantly slower than before. The letters of credit are still coming but only after serious reminders. Whether this is related to a backlog due to the holidays or it is the first sign of serious cash-flow problems will be seen in the coming weeks.
Total sales for the week were well below the weekly averages we would expect at this time of year. In particular, interest from Asia for cows was disappointing. The weaker US dollar is not really having any positive effect on negotiations. We ended up with only a handful of sales, which was not enough to clean up the week’s production of hides. For the male side this is not really a serious issue, because the regular shipments in Europe are still cleaning up what is coming in. For the rest, however, more ambition from the tanning industry should be seen in the weeks to come.
The kill: Fortunately, the kill has recovered and levels are acceptable for this time of the year. However, with the Carnival [South America] season now ahead of us one cannot expect numbers to be too good until mid-March and beef production should suffer in the weeks to come.
What we expect: The market is not yet ready for a turn, but it is now becoming increasingly interesting.
| 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 | € 1,70 |
Firmer |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1,75 |
Firmer |
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