German Perspective - 29.07.14
29/07/2014
The hide market was also quiet this week. Quiet doesn’t necessarily mean weak, just that there was reduced activity. In Europe, only a handful of tanners were around and only a few of them were willing to discuss business. Most of them were actually already covered and did not want to know about any additional hide purchases. Those who were were looking for bargains from suppliers who were desperate to sell and find a buyer at a market discount.
In Asia the situation was different and we can only thank our colleges in the US for giving us good shelter with the firm performance they report. This makes it much easier to negotiate prices with the tanners in Asia, even though they start every contact with very aggressive bids and most agents join the party trying to find a bargain for their tanner friends. Consequently there were a lot of enquiries from various markets, but only a handful were really serious.
In the end it is pretty obvious that a number of tanners have begun to worry that the big suppliers might be tough enough to really just lean back and wait until inventories are exhausted, taking no notice of the different conditions the market has to deal with. There is a substantial difference between the standard raw materials and the other lines, which are traditionally not used by the large industrial tanners. Those who have done everything to turn leather production into an industrial business have become far less flexible in their supply management, and this is well known by the selected suppliers who have a high enough volume of material available.
This is a trend that has been visible for some time already and various tanners are now beginning to wonder if the premium they are being asked to pay might be higher than any benefit they can generate from it. However, to roll the system back is hardly an option at the present time with the supply chains we are operating today.
For the moment price differences between premium and standard hides and the ‘non-regulars’ are drifting further apart and this is certainly a result of the massive influence of the reduction of tanning capacity in northern China, where the large production capacity was based on taking advantage of cheaper production costs, lower overheads, flexible picks of cheaper raw materials and, in the end, mastering what the tanning industry was once famous for, working every day to find the best combination of finished leather market needs and the best options in the raw materials market. To reduce costs by saving on investing in a proper wastewater treatment process was always going to be short term. Nevertheless, this capacity is missing now and this is reflected in the markets and will continue to be as long as the capacity does not shift somewhere else or other tanners return to more flexibility in their raw material procurement to close the gap again.
Sales this week were normal for a summer week. There were some smaller sales for heavy bulls in Europe and some for cows and heifers in Asia at pretty steady prices. The firmer US dollar continues to raise returns in euros; this is still not sorting the margin problems out, but it at least eases the problem. The total quantities are adequate for the standard articles, while we are still missing interest in lighter-weight salted bull hides. We still don’t like the very tough work needed to get letters of credit and payments for most contracts in China.
The kill: Holiday-makers are enjoying a pretty warm summer so far. Temperatures are on the high side for our part of the world, which is good for holidays, but not good for beef sales. Consequently, slaughter numbers are low and with the peak holiday period now starting, are unlikely to rise.
What we expect: Well, it seems that there is still a fair potential to sell lighter-weight cows to China. They seem to be the most attractive item, together with low grades. This shows how price-conscious buyers still are. Even heavier cows are not so easy to move, because of their price tag. So, we don’t expect much movement on prices if tanners are not really forced to replenish soon. So, we expect little business with possibly some currency help.
| 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 | € 2,45 |
Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 2,05 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 2,20 |
Steady |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,80 |
Steady |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,70 |
Steady | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2,20 |
Weak |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2,30 |
Pressure |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 2,15 |
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 | € 1,70 |
Steady |
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