German Perspective - 5.12.17
05/12/2017
The fresh hides in Europe still seem to find a home, in many instances on the back of salted material. We are receiving an increasing number of requests to delay the shipment of salted hides bought for December in favour of fresh hides. This doesn't mean the contracts are not honoured, but that the material planned isn’t moving the way it was expected to.
It shows that the tanners are opting to take fresh material before salted hides and they consider this as a backup for the expected lower kill at the beginning of the New Year and after Christmas.
Some are hoping that the declining kill at the beginning of the New Year could bring the market into balance. For the premium hides consumed mainly in Europe this could be an option, but it is a bit optimistic for the standard materials that compete with the international supply. With a few exceptions, there are more hides available than tanners are willing to buy.
Most large beef producers and hide suppliers around the globe continue to try to stabilise the market. Whether or not they will be successful, only time will tell, but for the leather business we assume the significant price correction in many origins has allowed the tanneries with orders to have a reasonable margin. They are the ones that continue to buy into the downward trend.
For the others, the lower prices do not help. The bad news from China continues. Tighter environmental controls are forcing tanners to shut and to disrupt production. The iron fist of the government makes tanners think twice before they commit to raw material. They are operating hand to mouth and this is likely to continue in northern China for the rest of the winter.
In Europe we assume that most tanneries have planned their budgets and have covered their needs. However, there are a few openings for immediate supply of selected items. It seems that one or two hide suppliers have got issues and this means there are opportunities for small lots to be covered.
On the positive side there have been more sales this week than in previous weeks. However, this is short term coverage of premium material rather than an indication of better leather demand.
Prices for premium hides have been stable while most of the bids from China have been too low to be seriously considered. Sales were flat with the usual focus on the better-quality end. Prices were stable in Europe and weakish again in Asia.
The kill: The wet weather and low temperatures keep the kill consistently high. As far as weights and volumes are concerned, one cannot complain. Christmas Eve is on a Sunday this year and that makes us believe that we won't see many changes until then.
What we expect: With the exception of quality material we expect the market to remain under pressure. For standard leathers it doesn’t seem that there is a realistic chance to reverse the price trend any time soon.
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