German Perspective - 01.04.14
01/04/2014
Many people have left for Asia last week and if there was any business done it was mainly during their trips. In general it is fair to say that the tanning industry is not desperate to buy at the present price levels so not too much trading activity is taking place.
This applies in particular to raw materials that can be considered to be in the medium and higher price range, because tanners today are busy looking for cheaper alternatives rather than supporting their regular raw material supply at the price levels we have reached. Most of the positive news is from suppliers of cheaper and more economic origins.
Another factor is the situation in Hebei province in China, where the shutdown of a large part of the tanning capacity has created serious interruptions in the product flow of many hide types and from Europe in particular dairy cows have been hit. While the situation is not just influencing hide sales it is also affecting shipments and the opening of letter of credits. Several buyers have become concerned about being able to process the raw material they have already bought and are reluctant to take further shipments before the situation becomes clearer.
The total cost of production there has gone up significantly, which is causing additional headaches. The Chinese government has become far stricter about almost everything related to the leather industry: customs issues, effluent and wastewater treatment and also the supply chain of tannery related gelatine production. All this is hitting small producers in remote areas pretty hard and for many operators things are definitely not what they should be.
This is actually good news, even if it might hit business and the market hard in the short term. Nobody is interested in uncontrolled pollution and unfair conditions in the market place when it comes to production costs. This will help the big producers who have built modern factories and comply with international environmental standards.
None of this does is affecting leather demand so far, so we are in a process of transition of production rather than going through any fundamental change in the balance between supply and demand. However, supply chains have to find new ways and the changing cost of production has to be reflected in the various stages of the supply chain.
These kinds of interruptions are causing financial problems too. The reduction of business has tightened the cash position of many of the producers and it has come at a time when obtaining credit has become more difficult in China. There is, in any case, worrying accounts of cash problems in the industry. It seems that after the prolonged rise of of raw materials prices we are at the start of a new phase of restructuring in the industry, another round of ‘survival of the fittest’.
Trading this week was reasonably light. There is always a bit of business to be done and what has sold has been more or less at asking levels. The moderate increase in the value of the US dollar has helped too, but most of the interest was for cheaper materials. People buy mostly what looks cheap, but might in the end not be cheap. Most of the sales were consequently for low grades or other hide types that looked cheap on the offer list.
The kill: The kill is totally steady now and in our opinion pretty much what we might expect at this time of the year. Spring is coming early and the grass is growing and if the weather does not change suddenly the cattle could leave for the abattoir three or four weeks earlier than normal. Weights which are lighter than one would expect for this time of the year.
What we expect: Our expectations are not too high for this coming week. It seems pretty much that those tanneries that are running well have taken care of their regular supply already, while the others need to sort out their businesses before they return to the market. We are quite sure that some of the usual ‘fair deals’ will be done at APLF and the large beef companies will support the market, but an enthusiastic and bullish tone cannot be expected.
| 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 | € 1,80 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1,75 |
Steady |
Share this story:
