German Perspective - 27.06.17
27/06/2017
Hide prices in Europe have been trading in a narrow range for a long time now and any attempt to push them in either direction outside of the range is quickly terminated when it is observed that most are happy with the way it is. All would be fine were it not for the impression that the stability brings with it insufficient margins or even losses along the chain. Processors, traders and tanners continue to complain about the situation, but nobody is working seriously on improving it. The general position is not ‘it could be better’, rather there is a fear that ‘it could be worse’. It seems that almost everyone has already surrendered and accepted that not much will change until the summer break ends in September.
The first large encounter and trade indicator will again be the All China Leather Exhibition (ACLE) in Shanghai at the end of August. With the shortage of real market news and trading activity, the focus of the trade this week was on the arrest of tanners and traders in Wenzhou, China. The Chinese government has again proved its intentions to control both illegal imports and the environmental issues. What was once finding its way into China through Hong Kong has over the years been diverted through the ports of Wenzhou and Lianyungang. The problem once again is how trading and the exchange of goods is regulated today. China is still using trade regulations and bureaucracy as a political tool. There is now a discussion about how many hides have been seized, how many hides are afloat or waiting for shipment, and what will happen to the hides from South/Central America and Africa, which will have to look for new destinations. It raises the question of whether there will now be supply issues for some tanners in China.
It is clear, however, that the Chinese government is demonstrating that its investigation and control system works and that the phase of any kind of tolerance is over. Low-tech polluting industries that create jobs no longer fit into the government’s general strategy. Chinese tanning investments in Africa and wet blue imports are supported, while low added value raw materials are indirectly banned, which dries up the raw material basis for many cheap leather manufacturers.
Sales activity was again on the low side. Europe is mostly finished with plans and procurement until the holidays and discussions are mainly focused on the larger programmes of industrial players, where a cocktail of capacity planning and supply management of raw and processed material has replaced the classical ‘purchases’.
In Asia, small lots of specific materials are being bought on a very selective basis. We are not seeing any real volume or any of the usual commodity purchasing. Prices were stable during the week for the sales made. Sellers won’t sell cheaper and buyers won’t pay more for the limited volumes being discussed.
The kill: The kill continues to be in summer mode. Beef production will decline further, reaching its lowest point between the end of July and mid-August. The decline of average weights has been less pronounced than in previous years.
What we expect: It is difficult to find a reason for any major new trend in the market. As far as prices are concerned, we are in a period of stalemate and there is unlikely to be a major change until the end of the summer. It seems most are happy with the way things are and this might be for the best until we can determine the real facts and decisions about leather for the coming season.
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