German Perspective - 02.05.17 - leatherbiz: Lea Leatherbiz

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German Perspective - 02.05.17

02/05/2017
What happened this week: It is difficult to find anything particularly positive in the market at the moment. We can point towards the specialties and the high-end, but this covers only a small part of the leather world. For the rest the market is as usual driven by Chinese activity and the general market circumstances there are not easy at the moment. Environmental issues in China, split credits, rising production, transport charges, the general decline in the use of leather in consumer products and the seasonal decline in production have created a mix that has not allowed a fair market balance between the valuation of hides and supply and demand for a few months. We have entered a situation in which the beef industry continues to manage price levels by the management of supply. This is creating a certain surplus of raw material in many places of the world and sellers have to decide now how likely it is there will be a strong recovery in demand for the hides in stock, plus the ones coming in over the coming months. For the standard items we think it is actually only a question of price. Tanneries, in particular the industrial ones, need raw material to feed production. Their business is stable and reliable as long as the big brands continue to use and need leather. So, they are just waiting for the right price.

The situation is not so complicated. Most of the tanning industry requires price corrections for raw material to bring their calculations back into the black. For side leather tanners, the situation is not so much influenced by the environmental problems many of the Chinese upholstery tanners have, and their decisions are mostly just based on the question of how calculations can be amended to return to profitable territory.

For upholstery tanners it is a question of how good the orders will be after the summer and what the price for splits and for finished leather will be. One can be pretty sure that when the price is right the big tanneries around the globe will try to secure as much raw material as they can to protect calculations for the most extended period of time they can achieve. Big suppliers and big buyers should find some kind of accord as soon as possible to lift the level of uncertainty from the market that we are presently facing.

Any kind of price correction seems to be the end of the world for the beef industry, but there could be decent market stability for a pretty long time.

In the cow market the situation is far more difficult because the players there are far less long-term oriented. The demand for upholstery leather is unknown and nobody has a clue what the final impact of government policy on the tanning capacity in northern China is going to be.

We experienced an extremely quiet week last week, with email traffic with Asia at a similar level to that of the Chinese New Year festival. Sales were almost completely concentrated in the European customer base with prices for males steady and for cows marginally lower.

The kill: Low kills now and next week with production shortended by the May Day holiday on Monday.

What do we expect: Everything points in the direction of another quiet week. The almost global holiday on Monday and the extended holidays in China for the first week of May makes us believe that purchasing activity will be low again. It is now a question of when the suppliers will be willing to get into serious negotiation with buyers to find an adequate price level to bring the market for many hide types back into balance.

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

 Weak

25/29,5 kg

27,5/28,5 kg

22/27 kg

25/26 kg

€ 1,50

Weak

30/+ kg

33,5/35,5 kg

27/+ kg

29/31 kg

€ 1,40

 Weak
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
 Steady
Thirds 15/+ kg 25,0/27,5 kg 13/+ kg 24/26 kg € 1,20
 Weak
Thirds bulls 30/+ kg 38,0/40,0 kg 24/+ kg 33/36 kg € 1.25
 Steady




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