German Perspective – 12.06.18
12/06/2018
The European industry is already beginning to discuss the break and how the coming weeks are going to be handled. As usual, the contract tanners will remain open. They are already working to full capacity, however, and so will be unable to take much of the material being put on hold due to clients being closed. Those who will be able to continue their regular programmes are happy and only need to expect moderate slow-downs of shipments during the holiday period. The others will have to hope for other solutions to avoid the need for salting and storage.
Business in Asia will be more important than ever before. Until two years ago the lead times in Asia required early purchase and shipment of raw material to re-fill the raw material inventory and pipeline for the increased winter production cycle. The demand was considerably lower last year and we still don’t know what will happen in 2018.
After the relatively long silence from China we should see a rebound in activity sometime between now and mid-July, to have the hides in the tannery in September. So far, it remains unclear what the tanners expect in terms of leather orders. They continue the usual game of ‘wait and see’ in the expectation of further falls in raw material prices. Various people travelling in China report a similar trend there to what we have seen in Europe for a while; more and stable demand for bet-ter quality hides and for wet blue.
This leads to two main questions. What will make the Chinese tanners pay the prices for premium hides or better selections? What will eventually happen to all the lower quality hides and lower selections already in stock and still coming? If tanneries in China see their only option to be using higher selections, the gap between higher and lower quality selections will continue to widen. It could also lead to the market for low grades running into the final dead-end, which would mean finding new solutions for these materials.
The biggest worry in this respect is that alternative uses are facing similar problems. The gelatine and collagen markets are suffering from similar situations and are also seeing a fundamental oversupply. The beef industry needs to prepare a plan B and have something in the drawer just in case. There is still a long way before the situation becomes a reality. Leather is likely to become cheaper again before then, which will give us the opportunity to see if a certain price level trig-gers more interest in the material.
Until then, everybody has to fight to clear production of the endangered grades. Leather business is not bad all over and this is not the first time the industry has gone through a period of restruc-turing. The good news is that the successful tanners of today will become even stronger.
Trading last week was light, but the number of offer requests was significant for the first time in months. However, the price quotes were not rewarded with any reasonable bids and the weaker US dollar made conversations even more useless. The bottom line is that despite increased inter-est, the number of sales was as low as before. Bids were $4-5 lower than anything realistic, at least until abattoir prices are adjusted adequately.
The kill: Like summer, the kill has also arrived early. What we usually see during the high season in August has come in May and June. People enjoy the lovely evenings, the kids enjoy the swim-ming pools, and it feels like the Mediterranean in the North. This is no good for beef sales, so we continue to crawl on with low numbers and light weights.
What we expect: We think that patience is the only thing required. Pro-active action does not seem to stimulate demand for hides or leather. There is never much in June and July. We are all waiting for next season to see if the Chinese tanners have gathered enough optimism for a larger round of replenishment.
| 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 | € 1,15 |
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 |
€ 0,95 |
Weak | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 0,90 |
Weak | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,70 |
Stable |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.65 |
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 | € 0,70 |
Weak |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.00 |
Steady |
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