German Perspective - 22.8.17
22/08/2017
In general, the international trade is preparing for the trip to Asia to attend the ACLE leather show in Shanghai. The show is not of great importance to international sales, but for the Chinese industry it is still significant. The show does offer some insight into the positions of the raw material suppliers and how tanners feel about their leather business. It is too early to obtain a real picture about leather demand, because most serious negotiations take place later in September or into October.
For the time being, the general paralysis continues in Europe, due to the holidays and the general absence of many players. In Asia it seems to be a mixture of a lack of demand for leather and the traditional attitudes of the buyers when markets are in decline. Many are waiting to speak to their leather buyers first, because one of the big worries is whether product manufacturers for will ask for substantial price adjustments.
The consequence of raw material prices falling is also that leather buyers demand adequate compensation. Without a clear picture on what price basis leather can be sold in the coming months it is extremely difficult for the industry to take positions. All this leads to a standstill.
Buyers are reporting that prices change from day to day, which doesn’t tempt them. Quite the reverse: large spreads scare buyers away. Various agents asked for updated offers this week including the request for a European market update, only to come back towards the end of the week.
There are plenty of rumours. Some say there were sales of heavy cows at almost steady prices, some say that there have been discussions about lighter weight cows at below the $50 level, the minimum levels of the last cycle. Some see leather demand in further decline, some see the positive tone of the global economy as the reason why from September onwards the markets will see a strong turnaround, some believe the strong automotive cycle is coming to an end, some believe leather in shoes and garment will have a strong recovery. This means we still have plenty of theories, but we will have to wait until the facts speak for themselves.
The kill: The kill continues to improve. It is still not ‘normal’ but is slowly getting there. The changes in slaughter have not seemed to influence the supply side much. Weights are still on the low side and it seems it will be some weeks before we see a return to a real normal.
What we expect: It seems the buyers in Asia have put everything on hold. It would require a real bargain offer to tempt anyone to take purchasing decisions before all suppliers have been seen. Little business with not much market movement should be expected.
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