German Perspective - 01.11.16
01/11/2016
This is good news because it means they have enough orders to justify keeping production going and taking a very short break only. Since this is applies only to a small number so far it is not yet representative.
Automotive tanners in particular remain undecided. This sector is sending lot of different signals. Although production remains pretty high, the general level of confidence is average at best. In any case it seems obvious that there must be a certain movement of business again between the various standard players. Some are slowing a bit and others are ramping up while the rest continue at steady levels.
In the other sectors or regions there is also a mixed picture. The high season is starting, finally, in Asia, but in Europe, and in particular in Italy, things are far too slow for this time of the year and tanners are complaining about a serious lack of orders, particularly from shoe and leathergoods customers. Upholstery is said to be so-so, depending on quality and factory. However, once again we must not forget that we in the hot season and should be seeing busy tanners and strong activity in factories and in the marketplace.
In Asia the situation is better. Demand for cows has stabilised. The time window is beginning to close, which means that there are just three weeks left to have raw material arrive on time. So, there is not much option. Although the volumes are all right and revenues have climbed thanks to the currency rates, every deal is difficult and takes twice as long as normal.
Talking about currency, Chinese tanners selling into the domestic market also feeling the depreciation of the RMB. Imports are becoming more expensive while domestic prices remain highly competitive. This eats into margins and is only partly compensated by better split returns here and there. This applies mainly for cow splits for suede leather. Whatever the real situation may be, the demand for female hides has returned to normal levels. It is still frustrating that the strong performance of the US market has not yet spilled over into the EU male section. The surplus of this material, which is not absorbed by the standard takers from automotive and high-quality shoe upper tanners, has not yet attracted the attention of Asian tanners. If the spread continues to widen it would be not surprising if they finally see the opportunities that exist here. However, so far they are bidding far too low and no business can be generated.
Sales this week were again mostly focused on the female and low-grade sections. Numbers were satisfying for the time of the year. Nothing overwhelming, but production could be cleared. We still sense a certain surplus of male material and it seems that there are already more fresh hides looking for homes than tanning capacity available. The capacity restrictions in Italy are causing concern and there is not too much alternative surplus capacity in the market.
The kill: The kill continues to run at high levels. The big kill of dairy cows for some time now is showing its effect and milk prices are beginning to rise again. We should still have a few weeks of high cow slaughter; later in November it would not be a surprise to see the number of bulls beginning to rise and the number of females decline.
What do we expect: We find it difficult to get a real grip on the market. There are positive signs including the currency, but there also problematic conditions. The next possible trap in the market could be the influence of the holidays. At the end of November shipments to China will be interrupted and this will be followed by the Christmas season in Europe, combined with a high kill.
| 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 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1.70 |
Weakish |
|
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 | € 1,20 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.25 |
Steady |
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