German Perspective - 01.08.17
01/08/2017
We don’t know if everybody will agree, but it seems that the European hide industry is about to be hit hard. The weaker dollar, all the problems around the German car industry and the decline in leather consumption in shoe manufacturing are all bad news. In particular those grades that have to compete with other origins will face massive headwinds if they aren’t already.
Until now, many might have taken this calmly with demand from automotive tanners at very stable levels and the upholstery market still in a reasonable condition. However, the changes in the currency market and the decline in US hide prices have made European hides totally uncompetitive in Asia. The situation has been slightly masked by the low kill that is normal in the summer months, but without a very strong rebound in prices the European hide industry will have to prepare itself for a serious revaluation of many hide types when the kill increases again. The biggest question in this respect is how much inventory potential buyers have already built up with cheap hides from the US so that even the rebound of production for seasonal reasons after the summer holidays will not support demand from Asia by much.
Most people have shifted a lot of their marketing activity and sales into Europe, but one has to be absolutely naïve to believe that the Asian and in particular the Chinese market can be substituted completely by the European tanning industry. In the next three weeks all will depend on the attitudes of the buyers in Asia. If we are lucky they will not wait until the All China Leather Exhibition in Shanghai to replenish some of the hide types they might need from Europe. And if we are unlucky they will let it come to the showdown in the last days of August when we know from history that anything can happen.
At the exhibition buyers can suddenly appear on day one of the show and clean up everything suppliers have brought with them. It can also be that we will reach day three with the aisles empty and buyers not willing to take any decisions because they are either not clear about their leather orders and prices yet, because they have enough inventory already or they are simply convinced that waiting will offer them better and cheaper opportunities later.
For this week we tend to believe that there was not much business done. In Europe tanners were busy winding down their productions and it doesn’t seem that there was anyone in need of raw material purchases, or even in the mood to talk about them.
Generally, order books for automotive tanners are pretty full due to a number of premium car models hitting the road pretty soon. However, this is not taking into consideration the recent news from German brands; they are likely to delay the roll-out of a couple of diesel models. We have not much to report in terms of prices, because no deal, no price.
The kill: The kill is presently really frighteningly low. For the coming three weeks we are in the peak season of the holidays. Rain and sunshine is letting the grass grow and milk prices are pretty attractive once again. Farmers are soon going to be busy with the harvest and nothing is really pushing them to sell cattle. We would be surprised to see numbers increase before the end of August.
What we expect: In the coming weeks one can only check the emails from Asia to see if some business and interest can be generated.We don’t expect much; our markets have to find a new and solid base in terms of prices before the market can normalise again.
| 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 |
Weakish |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1.50 |
Weakish |
|
|
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 |
€ 1,40 |
Weakish | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,35 |
Weakish | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,90 |
Weakish |
| 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 | € 1.85 |
Weakish |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,15 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.25 |
Steady |
|
|
|
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