German Perspective - 31.05.16
31/05/2016
This is beginning to be discussed in private, as are the financial implications of a slow first five months of the year. With only a few exceptions turnover has been sharply declining and many tanners ran only at 60%-80% of production capacity during that period, cutting sharply into the cash-flow. Rumours are increasing of payment problems in Europe arising between now and September. This should come as no surprise given the situation so far in 2016.
In China too there is talk of the difficulty in raising sufficient finance to run a tannery. However, China is a different world and its banking system cannot be compared to bank finance here in Europe.
Spring is beginning to be reflected in the business. Hides are becoming lighter and there are fewer males, which is holding the bull and steer markets steady owing to reduced demand. However, the situation is not that simple. Anything not being delivered to European tanners is pretty hard to place elsewhere. This is even more surprising considering that US steers still seem to be moving pretty well according to the export statistics, and at prices that make several EU options look quite attractive, provided of course that the prices quoted from the US are the ones really paid. So, we continue to live in two totally separate worlds: in one, tanners are consuming raw material and are able to pay an adequate price for it; in the other it is a struggle to justify leather as a material and things are shifting more and more towards alternative materials, which are still cheaper and easier to manufacture.
A change in fashion could come and leather could become a fashion product again. Then all would change once again. But presently this is not the case and leather is only a preference if the final product needs it for the sake of image or to justify a high price.
Trading this week was pretty light. There were sales, but activity was unconvincing and one had the feeling that decisions were being taken off the cuff. Hebei’s typical community joint agreement on prices and strategies, put together in local restaurants, is absent from the market so business from there is more sporadic, either from someone who is not a member of the club or is not well informed.
The price range for cows remains pretty wide and there is a price for all kinds of market opinions. We took the best of the range just to keep things rolling.
The kill: The kill continues to be on the low side and May holidays have kept numbers under control once again. Weights are dropping rapidly again, which is normal, but in this market not much fun. Low milk prices have not yet had any effect on the kill, but sooner or later they will make their mark.
What we expect: One cannot really make any predictions at the moment. The facts are clear. Hides that make good, natural and heavy leathers are still in demand. The others are seriously struggling and need to wait for a return in demand. This could happen but for the moment there is still no sign of it.
| 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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