German Perspective - 01.09.15
02/09/2015
The trade is still trying to digest the turmoil on the financial markets. After the crash we saw a very strong rebound, in particular in oil prices, which jumped by almost $10 in just two days. As usual, movements in the financial markets also have an influence on the mood of tanners, in particular the big players in the Far East are traditionally very sensitive to this kind of external influence.
This is good news in advance of the show and it might help to re-establish more confidence in the market for the time being. In general the uncertainty persists and quite a number of players have less than full trust in the rebound of several markets. In particular the low end of the market continues to face serious difficulties. Prices for low-grade raw material and splits still remain under pressure and the level of demand at the moment is not enough to absorb all stocks and ongoing production around the globe. The medium and higher-end the situation looks a bit better and hides are still finding homes and buyers on a regular level.
The price adjustment has made life substantially easier for tanners and only those who are not in possession of regular and stable contracts and customer relations continue to fear for next season, not knowing yet what the volume and the value of their leather contracts are going to be. With the problems in China one has to remain deeply impressed by the performance of the high-quality European automotive tanners. Although they like to get their share of the benefit of falling raw material prices they can’t let too many hides go at the present price levels, which are still impressively high and only moderately corrected, if at all. Theirs is a situation that has been totally different in comparison to the rest of the market over the summer.
However, the situation remains pretty uncertain here too, with the question mark around car sales in China and the expected higher kill in the last quarter of the year. One can feel the uncertainty in the tanning industry too as we wait to see if demand for leather improves in the coming seasons. On one side the tanners still remember very well the price levels they had to pay until April and consequently the present price levels look much more attractive. On the other hand, the outlook for the global economy is still totally in the dark, which means that raw material prices have seen only a temporary rebound. A big factor is also the split market, which is not recovering and is making tanners’ calculations pretty difficult.
Trading activity and sales last week were moderate. Towards the end of the week there was a bit of interest from Asia, mainly for dairy cows. The interest is not widespread and only a few tanneries were bidding at the beginning (albeit very aggressively), but were willing in the end to take a few hides at about asking price or slightly below. The recovery of the US dollar closed some of the gaps and so some of the orders could be taken if one was not willing to hope for better times at the show in Shanghai. The rest of the market remained on the sidelines and is either waiting for the Lineapelle show in Milan next week or for a better picture folling the show in China this week.
The kill: The kill has improved a little due to the end of the school holidays in most parts of northern Germany. The kill of males remains extraordinarily low while at the same time the kill for cows has gone up quite significantly. Some people think this might be the pre-announcement of a larger kill of dairy cows for the rest of the year due to the low milk prices.
What we expect: The All China Leather Exhibition could offer all kinds of surprises, positive or negative, both are possible. At least for the moment the heavy pressure on the market has definitely faded. This is definitely the good news before the doors of the leather fair open. Fundamentally there is very little reason for any major change in price levels in the short term, which might be for the best.
| 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 | € 2,30 |
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 |
€ 2.25 |
Weakish |
|
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 |
€ 1,70 |
Steady | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2,10 |
Weaker |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2,10 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.95 |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,50 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.50 |
Soft |
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