German Perspective - 13.12.16
13/12/2016
New business is not what is keeping people busy, but the general administration and the organisation of shipments as well as supply breaks for regular deliveries in Europe. This is always pretty stressful, and is proving to be so this year in particular because of the dates of the Christmas season. The week between Christmas and the end of the year is also almost a full working week, at least when you are in the hide processing business.
On top of that the end of December is for many companies also the end of the fiscal year and that means additional work for the preparation of final accounts for 2016. Mixed into the general hectic situation is general uncertainty about the future of the raw material market. There is too much conflicting information: the reduced tanning capacity in Europe, the question of how many hides Asian tanners still need for the production of their winter season and finally the question of how the kill is going to go in the first first quarter of 2017. Making predictions and plans is quite difficult. In addition one has also to expect a high volatility in the currency and commodity markets, which also influence the price trends. So, there are quite a few issues to monitor and to worry about for the first quarter of the New Year.
The European tanning industry is beginning to feel more and more the influence of the reduced tanning capacity in northern Italy. It is also becoming an issue for a number of hide suppliers who are focused on the delivery of fresh, chilled hides; apart from finding a customer, you have now to find an empty tanning drum as well. This has happened at the time of year when there are a number of larger packers and processors who would like to turn their excess raw material into wet blue rather than be forced to dump it onto the market.
One can clearly feel now that the lack of tanning capacity for mainly the extra heavy hides has disturbed the balance for many supply chains. Looking at the business in general we are right in the middle of the classic winter season. All the leather orders have been placed and this means that the industry around the globe is and will be working at maximum capacity now and for the coming three months. Maximum capacity does not necessarily mean using 100% of production, but producing at the highest level the leather orders allow before everything winds down again in the second quarter of the coming year.
Upholstery demand in China and the global production plans from the automotive industry are the two best performers. The shoe leather business is definitely still on the retreat, but independent of the structural problems this sector will also be in its strongest production season of the year in the coming three months.This leaves just the question of how much the tanning industry has already filled its supply requirements and if we are going to see a similar pattern to the one we see every year.
Continuing demand for the next eight or 10 weeks may be interrupted by the Chinese New Year holidays at the end of January, followed by plunging requirements in the second quarter.
Business this week was once again rather coincidental with cows for China at the current levels still being the easiest job. At the same time we see the struggle for low grades as well as for extra heavy hides, which are simply too expensive for Asian tanners.
The kill: The kill is easing down. This is not happening in a dramatic way but the peaks for the year are definitely behind us. Normally we should expect another flurry for the retail demand for Christmas and New Year, but the numbers should now be on the decline for the coming eight to 10 weeks.
What do we expect: Currency rates are helping to stem against price declines. It is hard to believe that the market will be moved much in the coming weeks. There may be some speculation, which one has always to expect, in particular from China, but the inelastic leather prices will have a strong and controlling influence on selling prices.
| 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 |
Weakish |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1.60 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1.70 |
Steady |
|
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 |
Weakish |
| 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 |
Weakish |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,25 |
Weakish |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.25 |
Steady |
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