German Perspective - 10.05.16
10/05/2016
High-quality shoe upper and automotive tanners need these hides and this means that we see the usual spring and early summer situation in which the supply declines and the demand remains only slightly reduced until the summer holiday period owing to the increasing number of public holidays in various countries. This can even lead to temporary shortages that sometimes occur during this period.
The market for all other grades is totally different. Lighter-weight cows, heifers and bulls can find no significant demand, definitely not enough to clean up production. There are bits and pieces from some of the regular and standard buyers mainly in Europe, but in general interest has dried up completely. As usual this is a mixture of a lack of demand and speculation.
The key problem can be located in China. Overcapacity, falling domestic demand for leather, rising production costs, cash-flow issues and restrictive government policies have deteriorated conditions and confidence. A number of tanners are also complaining that they face tremendous problems from leather imports that are said to be cheaper than their own local production. In the end this has a lot to do with the general purchasing policy of many tanners, in particular those in the north of China.
Gambling, speculation, doing what everybody else does and a general lack of real long-term planning and product development strategies are creating raw material purchasing activities that are no reflection of the real demand and market situation. This has created a two-tier market. One tier is the premium and heavy sector, in combination with steers, which form the raw material base for the industrial standard productions of leather. The second tier is the raw material that feeds the satellites of the fragmented consumer markets, which are facing a lot of headwinds in relation to substitutes and a decline in consumer markets. Consequently the price gaps between the two markets is widening, with the main problem that the low end has no real price level. Trading volume is so small that there is no real and reliable price level for many hides and the spread between buyers’ and sellers’ ideas is excessively wide and needs eventually to be closed.
Trading was once again pretty light. Regular EU business remains steady, but the overseas sales are waiting for an initial trigger. From the calculation of shipments and volumes one would assume that within a timeframe of about three or four weeks tanners in China have finally to replenish some inventory. Prices for males remained once again quite steady while all heifers and dairy cows still fail to find a trading plateau with the bid and ask levels about 10% apart with very little approximation.
The kill: The kill is dropping in contrast to other origins around the globe. Weights are falling too, which doesn’t make calculations any easier. In the next two or three months one cannot expect any changes in the general seasonal cycles.
What we expect: Nobody knows when the situation will change. The replenishing need is one side of the coin, but much more important are questions over when demand for certain leathers will pick up again to bring supply and demand back into balance and how and when the structural problems of the Chinese leather industry will be solved. We have to wait and see.
| 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 | € 1.80 |
Weak |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1.70 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,50 |
Weak | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,45 |
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 | € 1.90 |
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 | € 1,30 |
Weak |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.30 |
Soft |
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