German Perspective - 07.03.17
07/03/2017
Tanners who are busy and carrying a good order book are now going into the final lap of the winter season production cycle. Raw material for this has to be covered and European tanners are generally always one month ahead of production with their raw material purchases, at least the ones who are riding on the fresh hide supply wave. Others are a bit more flexible and the few still importing overseas hides manage things over an even longer period of time.
March has started and this means that the kill is now slowly going down so that supply is fading and lifting some of any pressure from suppliers. In about a month’s time leather production will also begin to fade slowly and then we get into summer mode with fewer hides and lower requirements, with the only exception being the automotive sector.
In Asia the situation is a bit different. Most cowhide clients are already covered until the end of April at least, if not until May. Some of them already have the end of the season in sight and are beginning to wonder about the present raw material price levels, which are similar to those of a year ago. Will they be able to secure new sales at higher leather prices, which would allow them to pay the levels that have been reached by the market in the meantime? Reactions from tanners show little optimism.
For about ten days now, the heat is gone; one does not need to be a genius to understand that the main buyers have been putting their heads together to stop the constant rise of prices. The best tool is to bid lower and to stay out of the market for a while. That is what they are doing at the moment. Bids are $2-$3 lower than last paid and this has brought about a complete stalemate. Another worrying signal is also that, occasionally, one has to push hard for letters of credit and shipping approvals, something not seen since last summer.
One may remember that even before the Chinese New Year everything was well organised and paid up with regular shipment, even during the holidays. That was not very common in the past. We would not call it a trend yet, but at least these are signals that need to be watched. If leather prices do not go up, one could come to the conclusion that tanners would need a similar decline in prices to find a solid base for calculations once again. Without higher prices for leather, it will get pretty difficult once again.
We are now in the weeks before the APLF fair in Hong Kong (March 29-31) and it is pretty unlikely that sellers will adjust asking levels on the downside before then.
Sales and business this week were a bit mixed. Dairy cows had a difficult time and not accepting bids meant no sale. It might also have to do with the returning environmental problems in China, which are making tanners insecure. Males were not easy either and it took a long time to find a common base. In the end there were a few sales for males and some low grades, while for females the ideas were too far apart to find agreement. Slaughterhouses have a completely different view and expect increases in prices for March. The market is pretty much a copy of 2016 at the moment.
The kill: As expected, the kill dropped by quite a bit. Until Easter (April 16 this year) the kill will remain lower. We are heading into the lower kill, lighter-weight season.
What do we expect: This is a period with very little activity. People on both sides of the table will be unwilling to move from their positions in the lead-up to APLF. Consequently, we prefer to wait and see who is the more desperate in the next quarter.
| 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 |
€ 1,50 |
Steady | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,40 |
Steady | |
| 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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