German Perspective - 20.03.18 - leatherbiz: Lea Leatherbiz

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German Perspective - 20.03.18

20/03/2018
What happened this week: Another week has passed, with many people travelling to Hong Kong to attend the APLF leather fair hoping for new insights and business. The show pretty much confirmed what we have been writing and expressing. As far as the show itself was concerned it was reasonably well attended, activity was much better spread over the three days than usual and quite a number of people were still busy on their stands until Friday afternoon. There will be a lot of mixed opinions about the event, depending on people’s reasons for attending. From chemicals to machinery, from raw hide to leather, everything was squeezed into one hall and that definitely gave the impression of a much more dense attendance and might have given the feel of more activity than there really was.

Plenty of country pavilions structured the exhibition pretty well and with the size it has reached so far it seems, at least to us, that it can have a future. Looking at the exhibitors it seems it has really now become the hub for the international leather industry to have a central location to keep in touch with Asian customers. Pretty remarkable was the general absence of Chinese exhibitors and visitors as well. Both groups obviously consider the show not important enough to appear in larger numbers.

As far as the hide business was concerned the agents were around, but they did not have too many customers to speak to. This meant most hide suppliers from around the globe either had to speak to each other or to customers from their home continents or others they had recently seen and talked to in Milan. For the sake of the hide business and sales it was definitely not worthwhile spending time and money on the trip to Hong Kong. There had been rumours swirling around of some sizeable business from various countries and we tend to believe that the total number of contracts and hides traded during the show may have been sufficient for some, but in aggregate we would be surprised at the number had been high. For sure, European suppliers will travel home with only some isolated and coincidental single contracts and sales.

Anyone who was waiting for a big swing in the market and for demand to pick up must have been disappointed; business levels during the show were the same as they were before the show. Good-quality hides that can be turned into good-quality, specialty leathers that can be distinguished from alternative materials still sell, and that market continues to be in a reasonable balance. Prices are under pressure, because even the good-quality tanners are feeling increasing pressure from their customers to adjust leather prices in sympathy with what they hear from the raw material markets.

There is no need to discuss the automotive business. The volumes are still there and there is no indication that within the foreseeable future one can expect any significant decline in this sector.

This leaves us with the problems of the mass markets and if the very last hide supplier in the world needed confirmation that leather has lost significant market share, that confirmation came in Hong Kong. There are frightening inventories of low grades and in the lower-quality origins and price is not really a factor that can clear that. There was news of some sizeable sales at very low prices, but suppliers should not make the mistake of believing this is a reflection of rising demand; not yet, anyway.

The market is in search of an argument either to convince big brands and retailers to return to leather or to trigger the appetite of the consumer again to look and ask for ‘the real thing’. If this is successful it could influence the demand for raw material at a later time. As far as immediate business is concerned, a few smaller sales have been made but just for the sake of continuity and friendship and only for the medium-higher range of the product line.

The kill: Winter is back and the kill continues to be on the low side of the seasonal range. In contrast to other parts of the world, the beef business in Europe is not too profitable.

What do we expect: The market for standard hides and leather must find an equilibrium again and this might be difficult in the short term. Also the price spreads are too wide these days. People are convinced that prices for low grades will fall.


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 € 2,10
 Weakish
25/29,5 kg 27,5/28,5 kg 22/27 kg 25/26 kg € 1,20
 Weak

Dairy cows

15/24,5 kg

22,5/23,5 kg

13/22 kg

20/21 kg

€ 1.30

 Weak

25/29,5 kg

27,5/28,5 kg

22/27 kg

25/26 kg

€ 1,10

 Weak

30/+ kg

33,5/35,5 kg

27/+ kg

29/31 kg

€ 1,00

 Weaker
Bulls 25/29,5 kg 27,5/28,5 kg 22/ 27 kg 25/26 kg € 1,70
 Weak
30/39,5 kg 36,0/37,0 kg 24/34 kg 31/33 kg € 1.70
 Weakish
40/+ kg 45,0/48,0 kg 34/+ kg 38/40 kg € 1.60
 Stable
Thirds 15/+ kg 25,0/27,5 kg 13/+ kg 24/26 kg € 0,90
 Weakish
Thirds bulls 30/+ kg 38,0/40,0 kg 24/+ kg 33/36 kg € 1.00
 Steady


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