German Perspective – 15.05.18
15/05/2018
The combination of the above created, during a period of stable and rising leather demand, a market bubble, which began to deflate at least a year ago. This deflation process does not seem to be finished yet. When combined with all the other factors depressing leather demand, it means we are facing the continued oversupply of raw material from many origins and grades.
It is debatable whether the ignorance of the trade and its attempts to fight against the inevitable is good or bad. It seems the last player in the market has finally acknowledged the situation of an oversupply of many hide types. It would be difficult to find anyone in the world who is not aware of the situation and who is still willing to listen and be impressed by the fairy tales about brilliant business, strong sales and steady prices.
We have come to the conclusion that the majority of tanners around the world are still busy. They profit from lower material prices, they need less cash, they have less risk and their concern is to stay profitable with sliding split credits, rising production costs and aggressive clients who want to spend less on leather but are also asking for better quality and selections. We are quite convinced that in the long run these successful tanneries and their clients will be able to manage the situation, strengthen their position and lay a good base for the future.
We are once again approaching the end of a decade. In the final years of the past five decades there was something that triggered a sharp correction in the market and a period of major restructuring. The reasons were always different. In the past 50 years the market has always found an exit from the problems, but it was easier to be more optimistic and prepared for the turn in the past.
Why? Well, just because there was never a strong trend against leather use or acceptance. It was speculation, cash issues in the industry, financial markets, politics and the normal boom-and-bust cycles which hurt the industry, but there has never been such a big question mark over whether the total demand for leather could actually absorb all the hides, splits and skins being produced. The balance that can’t be absorbed by the leather industry will have to find other homes.
Business last week was the same as before. European tanners continue to be active in the market, heavy and quality hides continue to sell, and moderate price concessions are sufficient to renew sales. The cow market in China continues to be in chaos and nobody knows what to believe from the stories swirling around about prices and resales. It seems that sales are just for heavy cow hides in Asia too. We don’t think it would be fair to quote any prices for that part of the world as we don’t have any reliable information. However, it can be said that prices are constantly under pressure and that cheaper prices do not result in more sales.
The kill: Another holiday on Thursday again curtailed slaughter. Numbers are low and weights are falling; we are looking forward to a full production week so as to get a real feel for beef sales. We are in the low season for the next three months, so not much will change, apart from lower weights.
What we expect: There is a market for heavy and male hides because here we see regular business with enough trading activity to deliver representative price indications. This is not the case for the cow and low-grade market, where there is too little real business to speak about a market. Until there is a better balance between supply and demand it is difficult to speak about a market. It seems we haven’t yet reached the end of the road for cows.
| 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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