German Perspective - 15.3.16
15/03/2016
Coming back from the holidays, people figured out that the leather buyers are not as active as anticipated and, even worse, they have no money to pay their bills.
Everybody is claiming that things are going to get better and it's just a temporary blip before everyone gets a clear picture, but this market is very unpredictable and things can change from good to bad as quickly as the other way around.
Consequently, very few people are buying and the bids coming in are $5 to $8 below what sellers consider the market. This is supported by some other European origins where minor quantities may have been traded at significantly lower levels.
The market for dairy cows is now desperately trying to figure out a level, with one side insisting on high prices that the abattoirs and lower kills create while the others talk of cashflow problems and low demand for finished leather.
The supply chain for dairy cows is congested and a number of traders are turning material into wet blue because they cannot resell it raw. What this means in terms of quantity is difficult to judge, because these players are trying to protect their positions.
It is fair to say that a number of the suppliers have been blinded by the activity for dairy cows in December and January and were too happy to believe stories of strong demand for furniture leather continuing after the Chinese New Year break. It is not so much a question of price, but we are dealing with fragile market conditions between supply and demand and massive price spreads between competing origins.
For male hides and heifers the situation is a bit different. Male hides are still being absorbed in Europe and the low kill, mainly for the lighter ranges, is dominating the market. The weekly demand for fresh hides is still absorbing most of the production.
For heifers it is not as easy, because the market is rather limited in Europe.
Sales and trading activity this week was again well below average. We would call business rather patchy. One would have needed to take substantially lower bids to sell. Prices in Europe remained steady.
The kill: No changes in the kill. Numbers are steady, females are dominating and the average weight of bulls remains high due to the late slaughter. For the coming weeks we expect the same pattern - at least until Easter.
What we expect: What can change our market? Abattoir prices are high and so everyone will be reluctant to lower asking prices.
Tanners don’t want to pay the levels and so the stalemate continues. How long this will go on for we have no idea, but it is obvious that a trigger is required to push the market into a new period of activity. However, one fails to see what this trigger could be.
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