German Perspective - 06.10.15
06/10/2015
The seasonal increase in leather production and reduced prices for raw material are good news for tanners with a stable customer base. Starting the busy season with prices that are (with the exception of quality, heavy hides) well below those of a year ago is certainly much more comfortable than beginning with certainty that you will lose money and uncertainty about supply and prices. However, as bad as the situation has been over the summer and despite all the forecasts about leather demand, the situation for European hides has at least stabilised for dairy cows at the moment, while the situation for males is more worrying. Car sales had been brilliant so far this year and one can only wonder what would have happened if difficult regions such as Russia had been in the market at the same pace as before the sanctions and the steep fall of the rouble. Delivery times for certain models would certainly be extended by quite some months.
However, all the brilliant sales of cars, also reported for the month of September, are a reflection of very busy automotive leather production in the first half of 2015. We will have to wait and see what is going to happen now. Economic worries in China and an excellent market performance in the US may be simple cyclical issues. In Europe one really doesn’t know what is going to happen with the car market. Anything can happen. Emerging and developing markets are not in perfect shape and might not be the same drivers as before. In other sectors substitution might be the main obstacle to a real recovery in demand in the coming months.
We are not really worried about the high end fashion sector, but this is simply not large enough to support the entire raw materials market. A general fear that deflation is just around the corner is also not helping the market situation. But life goes on and we would think that most European suppliers are still able to move and sell what they are producing and this is making them more relaxed than they were some weeks ago. Those who were very pessimistic some weeks ago are even daring to ask for moderate increases now to test the market.
As a matter of fact the price spreads were too large and the extremes are getting closer again. Those who were not willing to adjust have to consider corrections now and those who had been taking every bid going now feel comfortable enough to insist on price adjustments.
Sales were limited to first half of last week and most of the activity came from China for dairy cows before buyers left for their holiday. The volumes were not huge, but we have the impression that more could have been sold if wanted. Financials remain a worry. Some are running totally normal and have nothing to complain about, but others seem to have serious issues with their banks and credit lines and have to count every penny to keep things afloat.
The kill: The kill is finally getting higher and numbers are 10%-20% higher than in the summer. Colder nights should bring even more animals to market.
What we expect: China is still on holiday in the first half of this week but it will be interesting to see immediately after that how quickly payments and sales resume. The focus will be on male hides now; it is going to be interesting to see if the market can digest higher slaughter numbers. In the short-term it seems that we will trade in a narrow range.
| 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 |
Steady |
|
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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