German Perspective – 6.2.18
06/02/2018
In the past, there were serious ups and downs of activity in direct relation to the production cycles, the seasons and the holidays. We get the feeling these kinds of influences are fading more and more these days. It might have an influence on production with factories shutting down during the holiday periods, but modern technology has made the commercial people completely independent from office hours. As a result, they are now scheduling their activities in different ways.
The general problem, which we have had to deal with for some time, remains the fact that there is an extremely segmented market situation in the leather industry. We cover almost everything, from brilliant business and growth down to total agony. In a general statement, it might be fair to say that the situation moves down the quality pyramid from the top to the bottom.
The niche and high price segments run very well, but the more we move down towards the commodity and mass markets, the more the consumption of leather declines. It is getting difficult for all the manufacturers, no matter what they do. The situation is becoming increasingly difficult for the global beef industry. The problems that lamb slaughter has already experienced are beginning to spill into the bovine segment as well.
Materials that are not appreciated or do not meet high-quality or niche demand fail to see any kind of interest. For those who do not understand the differences in leather and leather quality, it must be hard to comprehend how certain raw materials still fetch record price levels and remain in tight supply while others, which fundamentally derive from the same beast, seem to have no value at all.
As a Central European supplier with a spread range of quality in the article range, it is currently not easy to find an adequate average valuation. There is too wide a difference between the easy turner and the demand from the regular quality customers and the grades which have already reached the problematic low-end section of the market.
How do you explain the market segmentation, the excessive value difference between hides that derive from beasts which are raised and slaughtered in the same region to someone who is not dealing with the subject every day? The butcher looks at it from the top of the price range, while the tanner has mostly the lowest price levels in mind.
The leather business is not delivering much news and cannot gain much momentum. The successful tanners continue to run their production at full capacity and to stick to the supplies they prefer or need, as do the suppliers, who take care to protect their quality customer base. This group doesn’t change, while more and more standard producers in China are either idle or have closed already, which has taken a lot of demand out of the market.
Sales this week were pretty limited and a copy of what we have seen for a while. Quality sells, programmes in Europe are renewed where necessary, and prices remain under pressure, with little impact on the high end and much more on the low end. The weak US dollar weighs on revenues and this means shrinking margins and average returns.
The kill: The kill improved a little last week, but it continues to be on the seasonal lower side of the annual range. Everything remains within the expected and normal production frame. We do not expect any change until the second half of February.
What we expect: The situation continues and we do not foresee any trigger that can change the situation until the Lineapelle fair in Milan. There would need to be a major adjustment in abattoir prices to make our hides more competitive. Without this, we will continue to stroll along; this cannot be the long-term solution. There is no reason to believe that prices will not continue to face further headwinds from the entire global market situation.
| 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 |
Stable |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1.30 |
Weak |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1.50 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,20 |
Weakish | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,15 |
Stable | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,75 |
Weak |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.75 |
Weakish |
|
| 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 |
Stable |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.10 |
Steady |
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