German Perspective - 29.09.15
29/09/2015
This is not an issue related only to this case, but a general problem and governments and media are creating situations in economics and politics where the ‘moment’ is more important then the long-term consequences. The list of examples is long, just in recent history. People today still have to deal with a number of consequences of decisions that were taken just to look smart on the evening news.
Anyway, the main question for the moment is to check what will be the consequences of this case and who is next. For the hide business such cases are more a psychological matter than something of real and direct influence. Car sales and production have not been stopped and clients may change brands or models, but not the decision itself. So we are still dealing with the question of how car sales in general will perform in 2016. There are all kinds of forecast around, but we think that the fundamentals are more negative than positive.
With regard to other sectors everything has been said already in the past weeks and nothing has changed since then. Heavily corrected leathers are in direct competition with substitute materials and have lost massive market share. In combination with the summer season, which consumes less leather, and a general downturn in demand, the need for raw material has been shrinking. Better-quality leather is in better shape, but cannot escape from the general conditions. Another, possibly even more complicated matter is the financial situation in China, with big losses for many in the devaluation of stocks, money still tied up in inventory, late payments and the banks, which are for various reasons are cutting credit lines for the industry. All this is no positive combination for the the leather sector and raw material sales, particularly when people base their market judgement on the daily trade only. In 2015 many should have learned again that the deal is only done when the money is paid and in the account. Everything else is just smoke and hope.
Outside the majors of the leather industry, which are absolutely normal and seemingly not facing any of the financial issues so far, the conditions in the industry are seriously deteriorating. About 20%-30% of business is facing delays and customer requests to change payment terms, or customers just not complying with the terms. This is enough to develop and maintain the problems we have been facing for some time already.
Trading and sales this past week were slow. At the beginning of the week there was some better interest for cows but that faded as the week progressed. The euro was a bit weaker, which helped, but the number of sales was not impressive at all and prices just steady.
The kill: Due to the warm weather the kill remains steady. The usual increases at this time of the year have not yet started, but that is only a question of time. Weights for cows remain on the light side.
What we expect: It seems we are going to see the next move in the market more quickly than we expected. The upcoming holidays in Asia and the unclear outlook will not support any market enthusiasm. The slaughter festivals in the muslim world will inflate general global raw material supply in the coming weeks, which will make things more difficult for a large part of the raw materials market. Generally we remain on the cautious side for prices.
| 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 |
€ 2.00 |
Weakish |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,75 |
Steady | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,65 |
Steady | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2,10 |
Weakish |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2,05 |
Weakish |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.90 |
Weakish |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,35 |
Soft |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.45 |
Soft |
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