German Perspective - 18.10.16 - leatherbiz: Lea Leatherbiz

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German Perspective - 18.10.16

18/10/2016
What happened this week: Slowly, we are starting to return to something ‘seasonal’. The weather has become substantially colder after a summer-like September, and people are starting to realise that we are approaching winter, with its usual dark and unpleasant weather conditions. It is late, but may not be too late for retail; reports are that consumers have begun window-shopping and to think about their needs for the wet and cold months. It’s hard to say if this will be positive for leather consumption. A short look through the shops shows you that at least for this season, for which goods were produced six months ago, leather has been seriously repressed in mass consumer items. The only exception may be bags and accessories, in which one sees the same, if not more, offer made from leather. Upholstery is a bit mixed. Compared to many years ago, the amount of leather in the showrooms is significantly less, but leather, if desired, can still be bought. It’s interesting, however, that where leather is an option you can get it for the same price as fabric; there is no premium for leather as a material, such as we saw for decades. So, times continue to be difficult in terms of price for leather although the retail market in Germany might not be representative of the general situation.

We are seeing two big trends at the moment. There is a clear indication that automotive leather is still strong but is losing a bit of momentum with reduced plans for the coming months and a certain settlement of prices for grades that had been correcting since spring. This applies mainly to dairy cows, which have reached bottom somewhere around $50 with minor fluctuation around this level. It seems that tanners with leather orders in hand were able to take what they could get. At least at these levels, in combination with the firmer US dollar, business in Asia could be booked and it was no longer like pulling teeth. More expensive hides are still difficult to sell in Asia and also low grades remain a battle.

In Europe many are talking about the renewed problems with effluent treatment in northern Italy. This problem is not really taking demand from the market, but is absorbing a lot of management capacity as tanners try to figure out how to get semi-processed hides of the right quality and in the right volume so as not to place more demand on their own effluent treatment capacity. For tanners and wet blue producers north of the Alps, this situation could provide a helping hand to fill their productions.

Another main topic of discussion last week was the rising inventories of low grades in wet blue and wet white which are looking for a home. It seem that this problem might persist for some time with not much positive outlook for cheaper leathers in the near future. Several people are talking about serious discounts on offer to anyone willing to take this material.

Sales this week were once again satisfying in volume. Renewed programmes and the seasonal uptick in demand from Asia added to what could be called a normal number for this time of the year. Cow prices were steady and the heavier these hides, the easier it was to achieve the asking price. Heavy and high-quality bulls were also steady, but it seems that the next round of business could be trickier. Lower prices for splits and falling valuation of the low grades are forcing tanners to look for discounts. Low grades are still very difficult to move at acceptable levels.

The kill:  The kill continues to be good. However, it is mainly driven by dairy cows. Farmers are de-stocking, as can be seen by the low weight of the hides that are coming in. The kill of bulls is, unfortunately, still pretty low and it seems that the larger volumes will only start for the Christmas season, that is from mid-November onwards.

What do we expect: Short-term we do not expect much movement. A little further down the road we would not be surprised to see the prices for males coming down. Preferably in stages, but the point is that current levels can hardly be sustained anymore.


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 € 2,20
 Weak
25/29,5 kg 27,5/28,5 kg 22/27 kg 25/26 kg € 1.50
 Stabilizing

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

€ 1,40

Steady

30/+ kg

33,5/35,5 kg

27/+ kg

29/31 kg

€ 1,35

 Steady
Bulls 25/29,5 kg 27,5/28,5 kg 22/ 27 kg 25/26 kg € 1,90
 		Weak
30/39,5 kg 36,0/37,0 kg 24/34 kg 31/33 kg € 1.90
 Weakish
40/+ kg 45,0/48,0 kg 34/+ kg 38/40 kg € 1.80
 Steady
Thirds 15/+ kg 25,0/27,5 kg 13/+ kg 24/26 kg € 1,10
 Stabilizing
Thirds bulls 30/+ kg 38,0/40,0 kg 24/+ kg 33/36 kg € 1.25
 Steady


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