German Perspective - 6.6.17
06/06/2017
The Shoes & Leather fair in Guangzhou, China, which took place last week was considered a pretty quiet one. Visitors and exhibitors had the opinion that attendance is shrinking from year to year and the fair is losing its importance. Those we spoke to mentioned that interest for leather was subdued and was mainly focused on specialties.
On Tuesday morning, one could have been happy with the number of enquiries, but it turned out to be just buyers just sniffing around to see if any bargains could be had. We didn't see any serious interest for the quotations we gave. The bids placed were about $4-5 below market level and only one buyer was willing to reconsider his position to get close to what the hides would need to bring home. Most others were just reporting how cheaply they can buy hides from other areas.
It is difficult to figure out how many of the rumours about a crisis are true. The only thing one can see is that the US suppliers grab the commodity market share and have adjusted their asking prices over the past two months. They also have the benefit of the declining US dollar.
For the bread-and-butter business in Asia, European hides are far too expensive. This means the US prices after the strong sales of the past weeks will have to go up or the European prices will have to come down to match the competition. This applies to the standard items such as dairy cows, heifers and some bull hides. The main problem remains the traditional lower slaughter due to the season and the various holidays in spring and early summer. Supply is generally restricted, which makes competition at the slaughterhouse door extremely complicated. On one side the hides are needed and on the other the value of the hides is determined by the global market situation and not by the local one.
Due to the regular production of heavy hides in the European tanning industry, the slaughter of heavy cattle is not sufficient to cover the just-in-time deliveries. This makes it easy for abattoirs to maintain hide prices.
Sales during the week were once again below par. The local deliveries continue to see steady demand. Overseas business can be called patchy at best. Wherever customers in Asia can avoid European hides they do, and focus on the more attractive options. The demand from the industry can be covered without European hides - at least, this is the impression we get.
The kill: The kill was pretty low once again. Next week will be shortened by a holiday on Monday so the numbers will not recover for the week after, if at all. Weights continue to be in their seasonal decline.
What we expect: The market will continue to be out of balance. Maybe US prices will go up and Asian tanners will have to return to market to fill their orders. If not, things will not change much until the valuation of the hides normalises.
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