German Perspective - 08.05.18
08/05/2018
Large industrial tanners, including the main automotive leather makers, continue to keep production levels steady. They focus on steady output and are benefiting from lower raw material prices. So far, they have not been hit by the global decline in leather demand and only an indication of a slowdown in global consumer spending would seriously depress their business.
Until today higher energy prices and higher interest rates in the US have had no significant effect. However, the car market should be monitored. The catch-up effect across the Atlantic, in combination with higher interest rates, could slow car sales down, but this might be compensated by the unbroken performance of many emerging markets. In Europe the ongoing discussion about diesel cars may promote advanced purchases of petrol cars, which might be able to sustain new car sales. Smaller and medium-sized tanners are the losers at present, unless they are market leaders in specific niches. ‘No name’ standard tanners, in particular in China, are the main victims of the trend of shrinking leather demand and this is weighing on the business of import traders, of wet blue suppliers, finance companies, leather wholesalers and low-price finished product manufacturers.
The general decline of leather, in particular in the shoe market, is what is maintaining pressure on the hide market. For us in Europe this means the markets for dairy cows, low grades and heifers in the range of 20-35 kilos are being hit hard; there does not seem to be enough demand to clear production for the foreseeable future. While European tanners are easier to read, with shorter inventories and more just-in-time deliveries, China and the true inventory situation there is the big unknown. Most sources speak about large stocks of raw and wet blue hides, mainly of low grades.
What is definitely true is that Chinese buyers outside the industrial players have been under-performing in their purchases for a long time now. It is also true that in the North of China tanning capacities have been closed for a long time for environmental reasons but are said to have a chance of reopening some time in May. Despite the fact that this is late for this season and for hide sales in the coming months, it raises the possibility of existing stocks clearing by enough to require replenishment for next season. That looks far away today, but with the required lead times it could start to make an impact by the end of June for the refilling of stocks from August onwards.
However leather demand is not showing any signs of the necessary recovery from the current cycle of falling prices and disrespect for contractual agreements. As long as there are no global standards or consequences for contract breeches, casual purchasing and a lack of respect will not vanish.
Last week we saw once again regular business in Europe with marginally declining prices. The market for heavies found shelter from extended declines from the present and expected low kill for the coming weeks and months, but there was literally no interest or demand from Asia. With no demand from Asia it is also not possible to quote any realistic price levels for dairy cows and the other grades; rumours and gossip dominate price discussions. They are pretty useless anyway, because no deal, no price.
The kill: Due to the holiday on May 1 the kill this week was pretty low. Beef demand is faltering as well, leading to minimum slaughter. With another holiday on May 10 we should see pretty much the same for the coming weeks.
What we expect: It seems we will have to wait for at least another week if we are to find a trigger for leaving the present market conditions. The premium market is mostly in balance and consequently we see little price movement there. The medium-low end market is dominated by Chinese buyers who are oversupplied and there is almost no indication of any change that could create enough demand and give us more balanced market conditions.
| 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 |
Share this story:
