German Perspective - 11.03.14
11/03/2014
Not everything is bad, and this might still be influencing the views of many players in the field. Standard male hides for the European industry are still moving as they come in and with the declining kill at present there might even be some impression of a shortage again, as we have seen a number of times in recent years, but at different and lower price levels.
Top-quality calfskins are still benefitting from the strong performance of the luxury trade. Ox-heifers, wherever they are produced, also still find homes when the price is right. Low grades are also still in sufficient demand. So, anyone who is just producing these types of material may find the market still pretty solid. When it comes to dairy cows or standard light-weight hides, however, the situation looks a bit different. The problems of effluent controls and closures of tanneries in China are hitting this market pretty hard, not to mention the financial situation many tanners are facing. We find demand pretty slow and it is not really a problem of price, but rather a problem of currency exchange rates.
The financial markets are ignoring the situation in the Ukraine and how much impact it could have on the economy in many EU countries. That there could potentially also be a problem with Russia seems to be ignored too. The markets are just watching the European Central Bank and weighing up the chances of another rate-cut, so the euro gains value, which hits export revenues. The US dollar has slowly but surely lost five cents or 3.5 %, which translates as between EUR 2 and EUR 4 per hide, although price levels at the slaughterhouses have not reacted yet. EU hides were not too attractive before and the decline of the US dollar and the problems in China, namely in Hebei province, haven’t made the product more attractive recently.
Most players seem not to be worried because many are still focusing on the supply issue and the opinion remains, stubbornly, that the global number of hides produced is not enough to satisfy the demand for leather. However, at present, it looks more as though many markets are being controlled, rather than this being a reflection of daily volume trades. Consequently it continues to be difficult to set a fair market level for many hide types and especially for dairy cows.
Regarding the real demand for many types of leather, we will have to wait for the Lineapelle and APLF shows in Bologna (March 11-13) and Hong Kong (March 31-April 2), as well as for the results of the trips to Asian customers around APLF. They should deliver real facts about what to expect from the business in the low season during the summer. It remains difficult to make a judgement on the basic demand for leather, which is outside the luxury sector and what this is going to mean for raw material demand for the spring and summer season.
Trading was pretty light, but towards the end of last week a bit more life came into the market and a few more bids were seen. They were a bit below asking prices, but currency levels were the real problem. The decline of the US dollar has made any bid from overseas look not too good and it was quite difficult to take decisions. One has to hope either for the market to rise or for the euro to fall, as the prices presently obtainable hardly cover the prices paid at the abattoir door. In the end we decided to do some cherry-picking and took what we thought was best, so a reasonable amount of hides were moved in the end. It may be April before we know if this should make anyone happy or not; by then everyone should have a clearer picture.
The kill: The kill dropped quite a bit last week, but this was most likely as a consequence of holidays for Carnival week. In particular males were hit hard and the numbers were not really good enough to keep the normal product flow in fresh, chilled hides. It seems we might have a few more weeks ahead in which the kill will be pretty low.
What we expect: Next week we will meet a good number of people in Bologna. Possibly we might get an impression for new leather trends, which could help a bit in regard to market judgements. Regarding prices and demand, we do not expect much news and it might take until the fair in Hong Kong for us to have a better picture. Until then, margins will remain extremely tight and one can only hope that the US dollar doesn’t want to test the next big figure, namely $1.40 to the euro.
| 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 |
Weakish |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,95 |
Weakish |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,80 |
Weakish |
|
| 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 | € 1,75 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1,75 |
Steady |
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