German Perspective - 02.12.14
02/12/2014
The reasons for this are the wide spreads between the prices we see now. Origin versus origin, product against product, type against type, selection against selection … there are so many hide spreads that make no economical sense. All these gaps need to close before we can speak again about a solid base. Adjustments will happen and the main question is if the expensive material will support the cheaper or if the cheaper will drag the expensive down. In our case it means that the demand for females remains stable while the expensive males look increasingly shaky. One can see a similar pattern in other parts of the world too, possibly with different types, but with the same results.
The upcoming Christmas season is now beginning to have an effect. Everyone is busy with their preparations for the remaining production weeks of the year. For the raw material department that means that supplies are planned and productions covered. With the order books tanners have no one is desperate to secure any additional hide supplies and, strangely enough, few are even thinking already about the New Year. Tanners are pretty relaxed and convinced that the wind has changed and no one has to be too concerned about sufficient raw material being available.
It’s a totally different situation compared to the end of 2013 and the start into 2014. Despite some items still clearing well, the general tone and talk of the market is still more negative than positive. Some suppliers might be in a better position than others, but there are plenty of rumours around of late payments and contracts in dispute or at least under discussion, all of which is traditionally related to a weaker market. Finally there is nobody who would say leather demand is anywhere close to that of the beginning of the year, with the only exception being some parts of the automotive industry and some high-end niche productions. They might be important for a part of the industry and for suppliers related to it, but certainly not for the general market or the majority of leather production.
In the leather industry one can feel the consequences of the problems with Russia. Sanctions, the devaluation of the ruble and inflation have wiped quite a bit of demand for consumer products away. Some may say the Russian part of their business is small, but in total it is hitting the consumer product markets by quite a bit. And in the hides market, even if it is only affecting you indirectly, there is a saying: One hide too many and the market is weak and one hide missing and the market is firm. This describes it pretty well in general.
Sales this week have been a bit of everything across the board, with the main destination Asia. As far as we are concerned we are still one of the attractive options and so more buyers are turning their interest to hides from this region to substitute others. That keeps sales moving without any real excitement. Shipments, containers and letters of credit are the biggest challenge, to make sure that everything planned for December will be on the boat. One can easily see who has the orders, who needs the raw material and who is quite happy when there is no vessel for hides to travel on.
Prices were pretty steady, but buyers are still aggressively trying to find a weak spot in the defence line.
The kill: The kill is pretty heavy now. Everyone says this is already in preparation for Christmas. We think this could be too early and the high kill is just the result of cattle being ready for slaughter. Hides are heavy, in particular males. All indications are that we will also see high kills for the remaining week of the year.
What we expect: Although we haven’t suffered too much recently we still think that the trend is down. The day when other origins begin to adjust, the pressure on us will return too. This might still take a few weeks, but without a general uptick in leather demand it is hard to forecast any improvement or turnaround of the weaker undertone in the market.
| 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 | € 2,35 |
Weakening |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 2,10 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 2,30 |
Weakening |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1.95 |
Weakening |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,85 |
Steady | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2,25 |
Weakish |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2,20 |
Weakish |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 2,05 |
Weakish |
|
| 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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