German Perspective – 24.04.18
24/04/2018
With the decline in demand for low-grade material continuing and stable or perhaps improving conditions for premium product the spread is getting wider each week. As a result, we continue to deal with two different markets, one where leather benefits from the fantastic performance of the global economy and another where leather is increasingly substituted for alternative materials.
Demand from China remains frustrating, especially for the dairy cow market. The dominance of China as a consumer of European cow hides is now seriously affecting suppliers. There were lots of rumours last week about contracts not being honoured, even for goods which have been arriving against deposits paid. If these rumours are true, it would mean Chinese buyers would are willing to lose their deposit of 20% or 30% rather than pay the remaining amount and deal with the merchandise.
We tend to believe there must be issues with contracts that were far more expensive on the day they were signed. This would at least explain the rapid fall in the market price for dairy cows; if a seller needs to resell a product for which they have already received a deposit of 25% they will be much more flexible on price, especially considering the demurrage charges which have to be paid when containers are not moved quickly.
Although it doesn’t make the market conditions any better, it does at least explain why the prices reaching Europe from China are so low and why they have plummeted in such a short period of time. The big question is how quickly hides can be resold to prevent deepening congestion in the pipeline.
We see the opposite situation for male hides. The kill of male cattle has significantly declined and this is going to intensify over the next month due to three weeks shortened by holidays. The demand for fresh hides from the European leather industry remains stable despite the price problems. We may run into the usual seasonal supply shortages at a time when tanners expect raw material prices to fall to reflect the leather market and international price trends. This will not make hide business or negotiations any easier in the weeks to come. The good news is that there are still market segments where leather demand and business is stable and adequate.
Business and selling activity last week reflected the above situation. We couldn’t trace any serious interest from the Far East for cows, heifer or low-grade hides. At the same time, one can already feel that the supply of heavy male hides has started to shrink. Tight supply situations and logistics in the fresh hide pipeline are starting to become a challenge. For European male hides, we would call the week steady in view of the general market situation.
The kill: The kill is unquestionably falling, as are the weights. Given the present weather conditions, we are unlikely to see more production any time soon. We will likely have to deal with low numbers for at least the next four to six weeks.
What we expect: As already mentioned, we cannot imagine what would let us leave the current vicious circle. There is more to say about all the activities against leather and all the alternative products which are being thrown into the market at the moment. Leather will have a difficult time until people fully understand that it is the best and most sustainable use of a by-product. The enemy is plastic and nothing else.
| 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 |
€ 1.20 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,00 |
Weak | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 0,95 |
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 | € 0,85 |
Weak |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.00 |
Steady |
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