German Perspective - 16.08.14 - leatherbiz: Lea Leatherbiz

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German Perspective - 16.08.14

16/09/2014
What happened this week: The Lineapelle fair in Milan has now passed; a new location and for many a challenge to get used to the long distances that have to be covered. One had the impression after a day that the walking distance is far greater than in Bologna, but not having measured it with any new gadget, this might just be an illusion. Generally the fair was well attended and in our impression the new location was accepted and welcomed by the majority of visitors. The size of stands was impressive and many seemed to be much bigger than in Bologna.

The good news was that the show proved again that leather remains a material of great attraction. Hardly anyone was displaying any concerns about general demand for the material or expressing fear that it could be eventually completely substituted and become a niche product. We must also remember that Lineapelle is still one of the higher-end shows and not representative of leather as a commodity material for shoe manufacturing. Consequently it remains a reflection of the medium- and higher-end consumer market and not of leather in general. Just as a footnote we have been seriously surprised by how many people are coming to a leather show wearing non-leather shoes. This can also be taken as an example that leather has serious competition and has to qualify more than ever before (through beauty, image or price) to be used in the manufacturing of consumer products.

From a raw material perspective the event was a little bit difficult. European buyers were not prepared for the consequences of the higher US dollar and the ambition of many suppliers to push prices further. Quite the reverse: many leather buyers have told the tanning industry that they expect price reductions for their volume products, and certainly no price increases. This is in conflict with the present trend in the raw materials market and is actually putting the industry in front of a situation that is very difficult to handle.

Fundamentally, we have the impression that material for the very top end of extra-quality, natural leathers is still in demand, but this is a statement that can almost always be made. For the rest, price has become a decisive factor. Tanners are reporting that they do not see any real problem with leather demand, but the price targets that are coming from customers are almost impossible to manage with a standard raw material supply, in particular in the average price section, which we are mostly covering with hides from central Europe.

This does not apply to automotive and luxury leathergoods, but these are only a small part of the business. For standard items, the average price level of raw and semi-finished materials is simply too high and tanners are either escaping to lower selections or to cheaper origins.

The excitement of the fair in Shanghai faded pretty quickly in our opinion and only very special, not-easy-to-substitute materials found customers willing to buy. For the rest the situation was definitely far more complicated and higher asking prices have been quickly refused and not even discussed. To sell you had either to follow the ideas of the buyers or you had to take the hides back home again. Without a clear picture of what prices are going to be, it is not easy to make decisions. Sales were limited to bits and pieces and prices generally steady.

The kill: The kill, in particular for cows, was pretty good and numbers were satisfying. We expect the same for quite some time now and weights should rise too.

What we expect: The focus of sales should remain on Asia. This seems to be the only region where the current price levels can be achieved. In particular for cows, we cannot see that the asking prices will be accepted soon in other regions. Some suppliers continue to be optimistic and upward on prices, but we have to admit that we are more prudent and it would require another strong round of sales to make us believe in further upside potential.

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

€ 2,30

 Steady

25/29,5 kg

27,5/28,5 kg

22/27 kg

25/26 kg

€ 1,90

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 € 2,15
 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




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