German Perspective – 20.2.18
20/02/2018
While Lineapelle may have some influence on business because the tanning industry meets their clients, the fair in Hong Kong has a more psychological impact. In many years the show has been a breaking point in the market and has triggered the start of the next price trend for the rest of the year. As usual, very little happens before then. Beef companies around the globe usually take the dynamic of the higher winter production with them and try to either keep prices stable or push them higher on the back of higher requirements and shipment.
There is a pattern we have seen for many years; in the first three months of the year, prices are almost always stable or rise. This is excluding the impact of currency or other major changes on the financial markets. We have already reached the second half of February and it seems fair to assume that we are seeing a similar pattern in 2018. What should be mentioned, however, is that shipments and sales normally perform strongly in the first quarter. This is the major difference so far in 2018; while shipments are still performing well, it seems general sales are not.
Certain raw material types still run very well, but the general volume is less than what one would expect at this time of year. This is preparing a difficult base for the weeks to come and explains why opinions and positions are so varied at the moment. For most in the by-product industry it is favourable when the market is stable or if prices are rising. This implies demand is strong, product flow is intact, claims are few, and payments are good.
From a seller’s perspective, client behaviour is better, market risk is lower and revenues are safe and plannable. While a producer only considers the above scenario favourable, a trader also sees falling demand combined with general market problems as an option because everything that is sold has to be bought as well. When selling is difficult, buying normally gets easier and can offer opportunities for positive margins and business opportunities.
This is a scenario that a producer hates. Downside adjustments are difficult, if not impossible, and ‘official’ market statements and price lists lose reference. Although stability is the preference of almost all parties, it becomes difficult when faith in the real market conditions and the references is fading.
All remains the same in the leather market. The automotive segment performs well, with almost all brands reporting record sales in 2017. Furniture upholstery has its niches, but general reports suggest textiles and other non-leather materials have expanded their market share. The situation is the same in shoes, with mass production showing no signs of a return to leather.
Sales were limited last week and generally focused on the usual suspects, heavy bulls and selected quality items. The lower kill has lifted some selling pressure. Types that mainly find their homes overseas suffered from the holiday shutdowns and even more from the fall of the US dollar towards the end of the week. Sales are normal for the strong performers in Europe, while the total number was low due to the holiday season. Prices are stable, but revenues suffer when sales are made in dollars.
The kill: The week started slowly due to Carnival but returned to normal levels towards the end. Weights remain heavy and numbers will now run on lower seasonal levels until Easter.
What we expect: Most tanners in China remain closed this week. The focus of everyone in Europe is on Lineapelle in Milan. We think things will be unchanged. Quality leather will perform well. For the rest, it will depend of what the seller decides. We don’t see demand rising and so it seems likely that official prices will not change. Private deals will continue to make the market and prices will be set individually. Big changes are unlikely in the coming weeks.
| 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 |
Weakish |
|
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 |
Stable |
|
| 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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