German Perspective - 04.08.15
04/08/2015
Most in the trade are trying to defend against the slide in prices; overseas origins, especially, which have faced the steepest declines in the past three months, are now trying to call the market stabilising, or in some cases even rebounding. Well, they might have a better position at the moment because they are a more attractive option for now, but this is pretty much the same situation the Europeans were in during the first quarter of 2015, when they allowed themselves to believe that there were few problems in the market. Those in other origins had to deal with missing demand and a first round of missing sales. Now it is the turn of the Europeans to feel the pain of being too expensive.
This might still be limited to lighter-weight males and females and regions that are favoured with extra-heavy hides may still not feel too much of the headwind, supported also by the low kill. However, this does not change the fundamentals and as soon as the kill picks up again the reality of the demand side will hit everyone. It is all about demand at the moment.
Of course leather demand hasn’t totally stopped and many tanners still need raw material to satisfy their customers’ needs and to fill their productions, but depending on the sector the demand reductions are evident and before budgets and orders for next season are placed, it remains a guess by how much the demand has actually come down. The logic so far is simple. The better the quality and the heavier the hide, the smaller the decline. At the top end, the automotive industry still has the best demand and order books. The same might apply to high-end leathergoods and perhaps even the top end of classic dress shoes. Top upholstery might be all right too, but the real top in this section is pretty small and plays a very small role.
Going down the demand pyramid, it is frightening to see how much leather has been replaced and nobody around the globe can deny this. Open your eyes, look down at people’s feet and you will see what we are talking about. In the casual shoe sector leather is today the exception and not the standard any more. Just a few brands were able to maintain their position; the large majority has quickly shifted and is using anything but leather. This has created large and excessive inventories of leather, which were and possibly are still burdening the market and destroying confidence.
It is still too early to tell what is going to happen and one can take a relaxed vacation, because until the end of the summer not much will change. It may be October before we know if leather orders will rebound after the correction of prices and the improved situation of inventories. We don’t want to be negative, but at this moment there is not too much sign of a material change towards leather; it normally takes a minimum of two seasons before price begins to influence again.
Sales this week were again pretty slow. There were a few enquiries here and there, but the ideas from Asia were far below what one could accept today so most of the business was limited to some sales in Europe. Price concessions had to be made, more on light and less on heavy material, as has been the case for some time. Asian buyers were nowhere to be seen and a number of European suppliers are beginning to get increasingly nervous for cows and standard items.
The kill: We saw a short flurry of production. The kill picked up by about 10% from a low level, but this was still surprising. Weights are still very low. With the peak holiday season now the kill will most likely just fluctuate around the usual low summer levels.
What we expect: Our expectations are running low at the moment. EU prices have downward potential. Most will just wait for the abattoirs to make adjustments before taking any further decisions or just wait on the outcome of the exhibition in Shanghai.
| 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 | € 2,40 |
Weakish |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 2.00 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ n.a. |
Weakish |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,90 |
Weakish | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,70 |
Weakish | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € n.a. |
Weaker |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2,10 |
Soft |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 2,00 |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,55 |
Soft |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € n.a. |
Soft |
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