German Perspective - 03.02.15
03/02/2015
Everyone these days is talking about the currency market, which is definitely in the short term playing quite important role in calculations but has generally not really any impact on the fundamental balance of global supply and demand of raw material and leather. It may influence the product flow around the globe, but it does not actually make leather sales in total any better or worse. So any variations are generally always just short-lived and become balanced one way or another by either adjusting currency relations or local currency prices.
We may discuss the currency market, but it should not really blindfold us to fundamental business conditions. With all the turmoil in the financial markets it hasn’t changed anything in leather demand, which everyone must have noticed is below the levels of a year ago. Raw material demand is being hit by a real-term reduction in leather demand, but is also reduced by less enthusiasm among operators for semi-finished material.
We are completely aware that our continuously cautious view of market conditions remains unpopular with some. However, we think it is better not to ignore the reality and to be as prepared as one can be against the possible market risks. In this regard we find it at least worth mentioning that the recent changes in the currency market have not triggered any additional demand from European tanners trying to defend against higher asking prices over the next weeks. Quite the reverse: they have even dared to bid down against the increased asking prices, which are based on the levels one considers to be valid in Asia.
The situation in Asia is far from being positive or totally clear either. Tanners need hides as usual, but we should be aware that the recent levels of interest were down to anticipated buying due to the holiday break for Lunar New Year and possibly also some security purchases due to the west coast ports strike in the United States and the congestion in shipments it has caused. We don’t think there was actually more lively demand in expectation of better leather business after the holidays. However, we could be wrong and may have to watch carefully when all the hides and shipments are moving again and the short-term stoppage is over.
Trading and sales this week have been pretty slow. The interest from Asia pretty much faded as more the week progressed. Next week most people will pack up and it will be pretty difficult to get anything done or organised. One can see this already by the payments and letters of credit openings, which have become in many instances like pulling teeth. We are seriously concerned in case all the financial transactions that are still promised do not, in the end, take place in the final week before the Chinese holidays. Sales have consequently been reasonably quiet. We have been blessed with some movement in males to China and the renewal of the regular programme deals with the European customer base. The US dollar steadied this week, but is still firm enough to allow us to hold euro prices steady, but not more. There have also been several offers under the market prices, which is a bit scary.
The kill: The numbers were pretty satisfying and despite being below the peaks, we are still quite impressed for the end of January.
What we expect: We are now entering the holiday season. If people were desperate for hides they would open up and pay more quickly for the material. New leather business does also not seem to be lurking around the corner and until the end of March tanneries seem to be well covered, possibly for even longer in Asia. With leather orders still lagging behind production, stocks will also last longer. So, for the moment our market is on the weaker side of steady, but we don’t expect many changes until the end of the holidays unless there is a major change in the value of 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 | € 2,35 |
Steady |
| 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 |
Steady |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1.95 |
Steady |
|
|
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 |
Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2,20 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 2,05 |
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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