German Perspective - 08.08.17
08/08/2017
The lead times of Asian tanners have normally kept them reasonably active in the market when their European colleagues are on holiday and a large number of them consider July and August to be an attractive time for bargaining due to the lack of competition. This year, there are two explanations; either the tanners in Asia don’t have the leather orders that would enable them to buy raw materials; or there is abundant supply from other origins at more attractive price levels so they are not really bothering with the European option. Maybe it is a bit of both. This leaves everything the same as it has been for a while. Specialties and niches continue to be in need of raw material supply but there are not enough leather orders in mainstream markets for tanneries to need to procure more raw material.
Opinions are mixed at the moment. People in Europe have finally realised that European hides need to undergo a long-delayed price adjustment. There is also the question of how good leather demand will be in the second half of the year and how strong the seasonal rise in leather orders and production will be after the summer break.
So far, we cannot find enough information to develop a clear picture. This is not particularly unusual because there is never a clear picture about leather orders at this time of the year. Market activity is usually a reflection of the general mood and expectations; if that is the case this year, the mood and expectations at the beginning of August must be pretty poor. We are not even seeing low or aggressive bids at the moment.
The available hide suppliers are displaying the usual positions, believing that there are better times to come and blaming the holiday season for being completely in the doldrums. This is building great expectations for the All China Leather Exhibition in Shanghai at the end of August and for the return of the European tanners after their holidays.
The critical question is how many tanners have already covered their needs from other origins (mostly the US). It seems that only a strong rebound in leather demand will create demand for hides. The first step that is needed is a rebound in prices to close the gap between European prices and those in the rest of the world.
Business activity this week was possibly the lowest so far this year. All the European tanners are on holiday and the Asian tanners are neglecting European offers due to price. The only enquiries we could trace were once again for some low grades, although there was little success in terms of sales. It is unlikely that the situation in Europe will change until abattoir prices are corrected to levels that will get our origin back in to play on the international markets.
The kill: The kill remains very low. Milk prices continue to rise, weather conditions are favourable for farmers, and we are in the peak season of school holidays. This is not expected to change over the coming weeks. It is likely that slaughter will only climb again from the third week in August. Until then, we have to remain patient.
What we expect: There are good reason why it might be wise to skip reporting in August: the general market is on holiday; the major players are waiting for ACLE in Shanghai; and the kill is close to the minimum. In Germany, we need to wait to see if the automotive scandals have an effect on production and buyer attitudes.
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