German Perspective - 07.02.17
07/02/2017
Many took the chance of a quiet time in China to fly to Chennai to visit the India International Leather Fair. The sector - at least those who are working more local - seems still to suffer a lot from the demonetisation. Larger companies producing for export will not be hit, but for smaller enterprises raw material supply and labour payment are a big pain. We were not able to pick up too much news from the Chennai event, but business out there for our type of raw material is scant.
The currency market is slowly coming back into focus. Not much has happened so far, but the trend has not changed since beginning of January, with the euro gaining strength as a consequence of the new US policy. We all know that currency movements are sometimes more important for the business and for hide valuations than the market itself.
In general there was time enough to speak with clients in Europe about business this week and to filter what their expectations are for the coming months. In most cases feedback was simple: things remain as they were. However, rising production costs and constant pressure on finished leather prices, in combination with higher demands for quality and consistency, are making life difficult for the tanning industry. Except for premium manufacturers, margins are again a problem as is the uneven spread of demand for articles and selections; lower grade types simply generate no interest at all. With stable demand for some premium articles, the stocks of semi-finished selections continue to rise with an uncertain outlook if and when they really can be finally moved. One can see this imbalance all over the markets.
Retailers are asking for lower prices all the time as this seems to be the only way to stimulate demand. Discounts and sales make for business.
Sales this week have been limited to the EU customer base. Packers want to make use of the lower kill and try to lift prices. So far, this has been with a lot of resistance and the key buyers for male hides have made clear statements that they need hides, but they are not so desperate that they would consider paying even one cent more. Cows were waiting for the return of the Chinese customers where currency will play an important role next week when clients in China will definitely be sniffing around to see what changed during their holiday.
The kill: The kill continues as it has been since mid-January with lower levels, but nothing extraordinary. The kill of males is suffering more than that of cows, but in general we would say that there is nothing out of the ordinary and beef demand is as it always is at this time of the year.
What do we expect: Next week will tell us a bit more about what we can expect. Many are quite optimistic about demand from China. However, Chinese tanners have signalled that their margins are eroding; they all expect higher production costs for the rest of this year. So, more activity with steady 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 |
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 |
€ 1,45 |
Steady | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,40 |
Firmish | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,90 |
Steady |
| 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 | € 1.80 |
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 |
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