German Perspective - 28.03.17
28/03/2017
We should not generalise. The above applies mainly to the upholstery sector. The busy season is over and at this moment it is rather questionable if the raw material and production cost increases can be achieved in finished leathers in the second half of this year.
In automotive we have seen, with the end of the first quarter, that the positive projections for 2017, made during the last quarter of 2016, have had to be shaved back to realistic levels. This does not mean that car sales and automotive production in the current year will be bad, but some brands realise that further growth and increases might not be possible so budgets have had to be readjusted. However, a large number of new models are hitting the road once again this year and this will prevent leather demand from dropping too much.
Hide exports are subject to rising freight charges, creatively invented surcharge requests and restricted freight space, with lead-times for bookings of six-to-eight weeks without guarantee that they will be valid when time for shipment arrives. The commercial consequences are the same for everyone with extra costs to be calculated and paid. This makes it unlikely that hides and skins can be shipped in the volumes and timeframes planned. It is clear that this situation is not going to change quickly and it could become an issue into spring and summer. If we are lucky it will be short-lived but the overcapacity in shipping will not disappear overnight.
The beef scandal in Brazil needs to be mentioned too. Scandals are always a big matter in the moment, but are usually not long-lasting. Sure, it has an effect, but for the hide business it can be assumed that most of possible declines in slaughter will be balanced from somewhere else; at least in exports, and with the seasonal decline in demand, it will not be felt so much in the short term.
Sales this week were rather spotty. Tanners smell that there is room for a correction and so they are bidding lower and waiting. This does not affect the better-quality section yet, but standard hides have to be prepared for lower levels. In our case prices in euro for export articles will have a tough time. A weaker US dollar, higher transport charges, lower hide weights and lower bids are mixing a toxic cocktail for margins and the coming weeks will be tough in the discussions with the abattoirs.
The kill: Temperatures are rising now and the grass is turning green. Easter lies ahead (April 16) and so the kill is what it usually is at this time of the year; it will not change in the short term.
What we expect: Over the next weeks the next price move will be made and a lot points in the direction that it is going to be on the down side for hides that generally find their home in Asia. High-quality types for the European market might fare better because steady intake meets reduced supply, which will help sellers. However, if the demand from automotive becomes tricky in the second half of 2017, this could change. Now we meet all in Hong Kong first.
| 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 |
Weakish |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,50 |
Weakish | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,40 |
Weakish | |
| 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 |
Weakish |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.25 |
Steady |
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