German Perspective – 03.04.18
03/04/2018
Automotive is the least seasonal with just the holiday interruption and the summer model changes. Shoe and bags are still in top gear for winter 2019 production, while upholstery is entering the slow retail season, which also causes production to calm down. This is the same procedure as every year, with the only exception being the worries these days.
We normally leave the winter semester with high raw material consumption and limited or adequate raw material inventories. Higher kills in some parts of the world and reductions in others meet for a period of around four to six months, with reduced demand in various sectors of the industry.
Warmer weather in the Northern Hemisphere, including in China, makes raw material storing and shipments far less popular; all those involved prefer to hold as little stock as possible in spring and summer. The strong performing sectors seem to be coping with the situation this year. So far, there is no indication of a decline in demand for automotive and quality leather. Price is a different issue, of course.
In the field of standard leathers, including furniture upholstery, the situation is entirely different. The general market trend and situation has been sufficiently discussed and described over the past months, so nobody can be surprised anymore, nor can they claim to be as all the information has been available for a long time.
The market for average and low-quality hides is congested. Leather demand continues to underperform. This has built large inventories, not only for suppliers, but also in various tanning centres around the globe. These inventories have slowly, but continuously, built, so it is understandable that the market has needed so long to reflect on the problem.
Neither sellers nor buyers were attracted by the idea of lower prices. Buyers have been happy not to buy, while seeing the value of their inventories protected by the stubborn position of suppliers with regard to asking prices. This applies in particular for cows in Europe. The other hide types are still finding homes and are creating problems in the next stage of production, where the good selections move and the low ones do not.
The market and price paralysis saw its first cracks in Hong Kong, where the subject had to be discussed face-to-face rather than through email exchanges. In a first step a few deals at discount prices were completed as sellers bit the bullet. They felt some relief, however, having sold some hides and in the hope of quick shipment.
This dream was quickly crushed by tanners from northern China asking to renegotiate prices and by the information that money is short and stocks are high, making payment difficult and shipment impossible. This has led to a lack of business and the next round of price guessing. The next question is how can hides be paid for and shipped in the spring/summer season. A new chapter opens with the start of April. The trade should finally accept that we have a much bigger problem than the question of what ‘the market’ is.
There was some trading this week. The usual performers sold, with steady demand for bull hides and mostly steady prices for some special selections.
The kill: The kill slowed due to the Easter break last week, which continued into this week. We should see a moderate weekly recovery, but we are heading towards the period of reduced slaughter.
What we expect: We will refrain from any predictions. Next week, the abattoirs and buyers have to agree on new prices. Let’s see what they have in mind under the present market conditions.
We are also seriously concerned that hide prices of the various types are drifting too far apart, which creates new problems and tensions. It seems the hide business should expect more turbulence.
| 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 |
Stable |
| 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 |
Weak | |
| 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 |
Stable |
|
| 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 |
Weak |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.00 |
Steady |
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