German Perspective - 07.11.17
07/11/2017
As far as Asia is concerned, China in particular, there are approximately four weeks left before the Chinese New Year break interrupts product shipments for a while. The same thing happens every year. If general market activity is the same as in past years, it would hardly be worth mentioning. We are in the first phase of the busy season of leather production, but we can’t feel too much from it yet.
Business in Europe is stable and normal, but general global business activity continues to lag far behind expectations. The biggest problem is that we have expected this for quite a while. It is almost impossible to find anyone with a good argument that suggests the situation will change. It doesn’t seem that there is any change in the general pattern of leather demand, neither in terms of quantity nor in terms of quality.
Those members of the tanning industry that are enjoying steady and stable business can’t really complain because the raw material market is moving in the right direction for them. In general, leather prices are less elastic than raw material prices. Those in a position to take advantage of sharp declines in the value of many kinds of raw hide should enjoy widening margins. It seems the declining prices of leather and raw materials are not stimulating demand at all.
General global conditions could hardly be more positive: interest rates are low, many labour markets are strong and retail consumption is high. That is without mentioning record car sales. If these factors aren’t enough, what is going to trigger greater leather consumption? It is difficult to say because the general circumstances for more leather production are simply not positive for the time being.
It is worth mentioning that the leather market reflects general economic conditions. Those who can take full advantage of strong asset markets, like stocks and real estate, are willing to spend. This keeps the luxury markets strong and expanding. The rest can enjoy more jobs, but there is not too much more money to be spent. In order to stimulate more sales and consumption, products have to be cheaper and there needs to be more changes in fashion to encourage more units to be sold.
All of this is bad news for leather as a material. One of the strong arguments for using leather has always been the durability and value for money it offers. These are no longer key factors in mass consumption.
As far as business was concerned last week, we cannot report anything new. The core customers, in particular in Europe, cover their needs on a regular basis. They are starting to ask for discounts and are getting them to different extents depending on the type of hide.
There might have been a little bit more interest and activity from Asia towards the end of the week, but it is still far away from any normal levels as customers are not willing to pay the asking prices. This has left very few opportunities for a sale. The business that has been done can be called ‘customer support’ rather than real business. Prices were once again under pressure and only the high-end range has stable levels.
We would say that further moderate price concessions had to be made. A number of sellers might have preferred to wait because the next round of abattoir buying is due pretty soon.
The kill: The kill and weights continue to rise and are coming closer and closer to the seasonal levels we expect for this time of year.
What we expect: It is pretty difficult to say what needs to happen for us to escape from the present situation and cycle. For us, the next abattoir buying will determine whether prices in our market will accelerate further away from the global market. It will be another seven to ten days before we know; it is unlikely sellers will make any serious decisions until then.
| 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 |
€ 1.55 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,30 |
Weakish | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,25 |
Weakish | |
| 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 | € 1.65 |
Weakish |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,00 |
Weakish |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.20 |
Steady |
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