German Perspective - 12.04.16

12/04/2016

Another week has passed and most people will have returned home from their trips to Asia. Some my have found plenty of work on their desks, others less but still enough to fill the first days after their return. What is the market reading now, more than a week after the exhibition closed its doors? Well, we would say not much different from what it was one week, four weeks or even 12 weeks ago. A lot has happened so far in 2016 and many things have changed, but the fundamentals of the hide market are the same.

Leather consumption is down compared to a year ago, the boom phase and expansion of the industry, which was mainly seen in China, is over and for the reasons we have discussed many times we are now in a phase of adjustment. This means less leather is produced and less raw material needed.

As usual, this does not apply to all sectors or to all types of leather to the same extent, something the beef industry and other suppliers, who are for obvious reasons not interested in further declines of their product value, like to cling onto. This leads to a market interpretation that is related to the interest and market influence of the individual players. This means that the players who have access to the best raw materials or critical sizes form a much more positive view of the market situation than those outside the premium niches and industrial supply chains who have to fight for and find new buyers every day.

Leather demand is the same or even better for some compared to last season, while for others it is way down. Depending on the raw material, the success traders can have in selling hides is totally different. The long period until mid-2015 when the market trends were generally up or down, ended last year and now we are in a much more fragmented market. For those who still find business pretty stable and prices steady, the market looks different.

It is totally normal for this group of sellers to look at positive reports as the benchmark and for those who are not enjoying the same success to hope that the good news and positive reports will shift into their business too. An increasing volume of hides of various types is building up in the pipeline. Not much has happened so far but where there is smoke there is also fire and behind the curtains people are starting to worry now.

Last week was very quiet and the general excuse was that people wanted first to sort out their visit to Hong Kong and tanners in Asia wanted to make exact plans for the material they will need for the next two or three months. However, we all know that these are just excuses when you are not certain and you want to gain time. It is, however, a clear demonstration that tanners at this stage are not in desperate need of hides and can play for time before replenishing.

So, it was another week in which most of the business was focused on customers in Europe and the general activity was below what one would expect. Just the regular buyers who favour their regular suppliers were active last week and sales were again limited. Prices were around the standard levels for the past weeks and months, but only the production of the prime grades is being totally cleaned up while others can sell only part of the production. Most of the interest this week was for sidelines such as low grades and other specialties.

The kill: Beef consumption and the kill are not impressive. We are now beginning to think about the return of cattle to the fields and packers are complaining about the beef business. It’s not really a great basis for hoping for higher numbers in the coming weeks. Weights have seen their peaks too and so hide weights should start to become lighter very soon.

What we expect: It seems we are running into the typical ‘after Hong Kong and into the second quarter pattern’ with declining demand and slowing production. Tanners are lacking faith in their businesses at the moment and are consequently not willing to replenish their inventory by anything more than what they definitely need. It seems more likely every day that we will see a correction again.

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	€ 1.85	Weak
Dairy cows	15/24,5 kg	22,5/23,5 kg	13/22 kg	20/21 kg	€ 1.90	Weak
	25/29,5 kg	27,5/28,5 kg	22/27 kg	25/26 kg	€ 1,60	Weak
	30/+ kg	33,5/35,5 kg	27/+ kg	29/31 kg	€ 1,55	Soft
Bulls	25/29,5 kg	27,5/28,5 kg	22/ 27 kg	25/26 kg	€ 1,95	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	Steady
Thirds	15/+ kg	25,0/27,5 kg	13/+ kg	24/26 kg	€ 1,35	Weak
Thirds bulls	30/+ kg	38,0/40,0 kg	24/+ kg	33/36 kg	€ 1.35	Soft

German Perspective - 12.04.16 - leatherbiz: Lea

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German Perspective - 12.04.16