German Perspective - 16.06.15
16/06/2015
The aim was and is always to find the reality. This has become increasingly difficult in recent years because the markets have forgotten that to find a fair balance and valuation you have to anticipate and forecast correctly. When the forecasts are inspired only by hopes and future intentions and not by facts (good or bad) the deviations can become significant like we see now. We have to deal with the situation as it is and try to look into the future to get things back into balance as quickly as possible.
For the time being the market is still dealing with imbalance and the middle of June is not the best time of year to obtain reliable information about the leather business and demand for the second half of the year.
What we know for the moment is that beef consumption and supply will be low until September and that the European tanning industry will start its annual summer holiday in about a month. We also know that Asian tanneries are not the best buyers in a falling market.
One can still sense a problem of cash-flow in the tanning industry for various reasons. Some tanneries are in good shape and have a strong position within the supply chain and are beginning to receive support from falling raw material costs; these will be the first ones to realise that more attractive raw material price levels only mean an economic advantage if you take it. For the time being nobody is rushing because everyone knows that for the coming weeks the risk of a market rebound and a general change in the situation remains pretty low. However, the strong tanners may also be willing to step into the market little by little. Even if they return we should be aware that they will not be able to do enough on their own to stabilise the present market trend, but it would make the whole situation a bit more gentle.
As far as Europe is concerned one should not be too hopeful, but the Asian leather industry has to take earlier decisions due to the long shipping and lead times.
Sales and trading this week have been reasonably slow. In Europe some production gaps needed moderate refill and the traditional sales and shipping programmes ahead of the holiday season needed renewal which has had a positive effect on the sales numbers but should not lead to a general misinterpretation of the situation. Bids from Asia have been scarce and prices have been placed pretty aggressively under the asking levels. In the end you have the option in a market like this either to take it or leave it. So, sales have been all right for the EU traditionals while the rest had been more something like a non-event.
The kill: We can only repeat ourselves. Kill and weights are very low at the moment. There is nothing from the beef market that seems to be able to trigger any change.
What we expect: We don’t see anything that could change the general conditions of the market in the short term. There will be a flurry of interest and sales in the weeks to come, because the tanning business hasn’t totally stopped and those tanners with regular business will need to take replenishment decisions soon. However they will be very careful and the rest of the industry, in particular in Asia, will continue to try to hit the bottom and not move until it is clear where and when this is going to be. This could even last until the All China Leather Exhibition in Shanghai at the end of August.
| 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 |
Soft |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 2,05 |
Soft |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 2,20 |
Weaker |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1.85 |
Weaker | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,80 |
Weaker | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2,20 |
Weaker |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2,20 |
Soft |
|
| 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 | € 1,70 |
Stable |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1,75 |
Stable |
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