German Perspective - 17.05.16
17/05/2016
China remains the main problem. Almost every day a new story circulates about cheaper prices and desperate sellers making cheaper offers in large volumes. True or not, one cannot ignore the confirmations from various markets about cancellations of older and more expensive contracts or the requests of buyers for renegotiation of contracts. This initiative is coming from the usual suspects in Hebei province. Again, history is repeating itself and what we see today is pretty much exactly the same as we saw a year ago. And the intention is the same as it was last year: these tanners are basing their business concept on speculating on raw material, rather than trying to develop types of leather that consumers will like and buy. When sales of finished leather do not reflect their expectations they simply walk away from their commitments; they believe that this is the best way to deal with the situation.
Of course, this does not apply to everybody and the real drama is that some people make others pay for their mistakes. Reliable and honourable partners are being dragged into the problem. It is high time that the industry dealt strictly with this: companies that do not honour their contracts should be blacklisted and only serviced in future if they pay large deposits upon accepting an offer. This is not only to protect suppliers, but also buyers who respect their contracts. If we as suppliers do not protect them how can we expect them to continue to maintain their moral standards?
In the meantime the spread between high-priced hides and medium and low-end ones continues to grow and it is only a matter of time before this spread is going to be stretched too far. This will make it shrink again. More tanners will monitor the technical options of cheap hides and force their technical departments to find solutions. The northern Chinese tanners will continue to try to crash the market to reach a favourable price level for replenishing stocks and to build inventory at very competitive prices for the coming season. How successful they are depends on the patience and resources of sellers.
Prices for dairy cows and heifers are quoted all over the place, but it is all gossip and talk, with very little business really done. Price levels are beginning to make leather attractive again. It is only May and it might still need until the approach of the new season, but price is no longer the obstacle and this will most likely also be realised by several buyers soon.
The kill: The kill is in the seasonal downswing. Weights are down and holidays are cutting production numbers. It doesn’t seem that anything will change this in the near future.
What we expect: At this stage it seems that the avalanche still needs to roll out. Without the Chinese buyers it will not be possible to stop the trend, although all sellers are now running to the second big market, Italy. However, we believe that we are getting closer to a round of selling activity. The strong performers are excluded from this as they are stable anyway. So, we will wait until tanners start buying.
| 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 |
Weak | |
| 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 |
Steady |
|
| 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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