German Perspective—24.10.17
24/10/2017
It may be that we are still suffering from the inadequate price levels we have to deal with or it is simply a lack of demand for raw material from the leather industry that is reflected in the slow business activity in the markets.
The biggest questions are still those surrounding the situation in China. Following the Communist Party Congress in mid-October, the industry is waiting for statements or decisions that could affect the consumer business or the future of the industry in general. On the assumption that the growth rates that are reported from China are correct, there is no real reason why we are facing such a major slowdown in raw material and finished leather interest from the biggest market in the world.
This decline in interest has been evident for quite a long time, although it is also true that raw material prices are by no means already cheap. What may be true for sheep and lambskins can definitely not be said about bovine cattle hides, in particular the ones in Europe. Even if we exclude the strong performers like the hides for top-quality leather in the automotive industry and the calf skins for the still expanding luxury sector, we have to accept that the present price levels are still more or less in the average range of the long historical cycles.
We must also accept that the process of agreeing a price has become much slower. This is definitely caused by the strong influence of the packer industry, which is trying to manage by-product revenues by printing price stickers instead of reflecting daily trade and sales. There are definitely political decisions and strategies too, which end up in the same results.
Inactivity from China for many hide grades has not made things any better. Without a market it is also pretty difficult to find a price, at least one that is the reflection of an agreement between a buyer and a seller.
For the current week at least we will see a repetition of the previous ones. The core business with regular and successful European tanners continues to be steady and wherever repetitions are necessary they are concluded. Certainly not at higher prices, but within the frame of moderate declines, so far. Outside this group, the stalemate continues. Everything that has been done can be called coincidental; there is not really any sign of regular procurement activity in the industry.
We have seen a handful of sales, mostly for low grades after long wrestling to find a compromise on the price. Asian tanners are generally thinking of price reductions in the range of 5% to 10%, which with the present abattoir prices can hardly be considered. Total sales volumes have once again also for this past week been under par.
The kill: Although the weather conditions have been warm the kill continues to climb and reflects seasonal averages and expectations. Hide weights are rising too and in particular females have advanced and compensated a little for the extremely light weights we saw during the summer.
What we expect: The search for agreement on price levels is still far from being over. The key question remains if prices are really the determining factor for demand at the moment. We tend to believe that this is not the case for a great part of leather production and conversations during the week make us believe that in other markets it is the same.
| 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 | € 1.45 |
Weak |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1.60 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,35 |
Steady | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,30 |
Steady | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,80 |
Weak |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.75 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.70 |
Weakish |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,05 |
Weakish |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.20 |
Steady |
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