German Perspective - 20.12.16
20/12/2016
From the leather demand side there is not really much news. We are in the high season and leather is still being consumed, but price pressure persists. With the recovery of prices of several hide types (cows) over the past two months in Europe. it seems now that we have touched the ceiling and tanners are not willing to pay more to get more. In this equation the currency market plays a very special role. For European exporters the recent weakness of the euro has helped a lot to improve short-term returns. This generally is pretty short-lived and is either answered by higher local prices or falling export prices. A bit of this is already happening, with several buyers bidding down since Thursday, pointing to the firmer US dollar.
It seems however also that the renminbi (RMB) rate, which has rebounded since the end of September, is the real driver behind the improved business potential in China. Tanners were scared about the trend of the currency over the summer, but confidence has been restored and the steady trend has encouraged buyers that they are not threatened by currency losses. We all know that speculative decisions can influence business in China by quite a bit. While until September decisions in China were on hold and calculations based on a RMB rate of 6.60 to the dollar, we are now close to 7.00, which makes production more competitive and export returns more attractive. Since Chinese tanners love to jump on trends (not only in the hide market) it is not unusual to see them play this card and to keep playing it until it fails.
The big question for our buyers in Asia (mainly upholstery and bag leather tanners) is what they are planning now for the rest of this season and for 2017. Under normal conditions they should already have covered the majority of their needs for this season. It may be that there will still be production in March and something for April, but then the leather production seasonally dwindles. It would require quite a bit of courage and optimism to take a long-term position with the world as it is at the end of 2016. Anyway, one never knows and we can only hope that everyone is taking things cautiously in such times of high uncertainty.
Less political stability and the start of rising interest rates should make everyone a bit careful in particular of the main drivers (upholstery and automotive leathers). In the shoe business we have no reason to believe that leather in general is regaining market share.
Trading this week was not very spectacular. Interestingly, there was good interest for low grades, which had been ignored for quite some time. Interest in this type of hide normally indicates that the regular ones are becoming too expensive, which is the second sentiment we got from this week. In the end we were able to book a good volume of low grades while business for regular cows and heifers was like pulling teeth. In the end a few sales were generated with the help of currency rates, but US dollar prices were a fraction lower than a week ago.
The kill: The kill continues to slow down. It seems that most of the high season kill is over and the slow rebound of milk prices has erased some of the extra kill of dairy cows. So, the kill is at normal seasonal levels, but far from being exciting. This week should be regular; it’s the last week of the year. Things will slow a little after that.
What we expect: Well, the year is over as far as the hide business is concerned. We might still see some bottom-fishing from bargain hunters from Asia who traditionally try to take advantage of the holiday season. In Europe, the year is over and very few will take any decisions now. January is covered and there is not likely to be any new business before the New Year.
| 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 |
Steady |
| 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 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.25 |
Steady |
Share this story:
