German Perspective - 22.12.15
22/12/2015
It seems that in particular tanners had a difficult year. Possibly some of the high-end and specialty producers not so much, because they could take full advantage of the drop in raw material prices. But mass producers and makers of standard items saw their business go down the drain. Inflated raw material prices in the first half, a drop in finished leather orders, and leather prices under fire in the second half of the year led to a situation in which Murphy’s Law applied: everything that could go wrong did go wrong. The question at the end of this year is how much damage this has caused and what will be the consequences. The main aspect is certainly if the reduced prices for raw material and the lower level of leather prices will stimulate leather demand again.
The cheap oil price, and stable and low levels of cotton have already made two of the main options very competitive in the eyes of leather product manufacturers and retailers. No inflation, no higher prices or the other way round - as one wishes - the lowest price sets the pace. Wherever leather as a material is part of the finished product’s DNA the situation is significantly better and it has been extremely important as a raw material supplier to be in close relation with these supply chains. Automotive leather for premium cars, high-end upholstery, specialties in veg tan and high street fashion are the ones everybody knows about, but they still represent only a small proportion of total leather production.
One has only to look at the price of related products such as splits and low-grades to figure out that the problem is not just price. Materials have changed, production has adjusted and it will need much more than just a low price to get this back. This has created wide gaps during 2015 between various raw materials; the old correlations and price structures in the market have been seriously changed.
This situation reflects also the mood of the sellers. Those who supply into the better sectors have a much more positive view of the market than the ones connected to the low-end market who are still suffering from low split return and the sharp decline in leather consumption. Sales and trade this week were pretty subdued. There remains an underlying interest from China for dairy cows and buyers are testing the waters to see if there is anyone who will blink in view of the break for the Christmas holiday.
Upholstery business in China is said to be better than expected, but how good is better? We all know that in particular the buyers in the north react more on the day and to what their neighbours are doing than from any visionary planning. So, the number of sales was quite limited and volumes as well. Whatever was sold was steady for females and a fraction lower on males.
The kill: The kill has been lower than we expected in the weeks before Christmas. Beef sales are not reaching the levels of the previous years and everyone has a different explanation. Generally we have to assume that the anti-beef campaign has worked and has left footprints in the consumer consciousness.
What we expect: This week will be quiet with many out of office. It doesn’t look that many want to do much until the reopening. So, there is little reason why the market should move at all. It is time to wish all readers some days of relaxing and peace with their families. No snow in sight, but nevertheless a very Merry Christmas.
| 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 |
Weak |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 2.00 |
Soft |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1.90 |
Steady |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,65 |
Steady | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,55 |
Steady | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2,00 |
Weak |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.95 |
Soft |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.85 |
Soft |
|
| 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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