German Perspective - 19.06.18

19/06/2018

What happened this week: In a short time, the first half of 2018 will be over. The end of the first half of the year is generally the beginning of the holiday season in the northern hemisphere. Although the full holidays have been shifted almost everywhere into the second half of July and August the preparations and the general slowdown in the leather industry can be felt before that. It will be the same procedure this year and many tanneries are already beginning to plan the shut-downs that is due in four or six weeks from now. This is no good for a market that is already suffering from the subdued demand for the majority of the rawhide types.

We are still waiting for some clear indications from Asia, and in particular from China, because the situation in Europe remains pretty clear. Without a major round of replenishment it’s going to be a difficult and complicated summer. Yes, slaughter is also going down, but this will be not enough to compensate for the reduction in production in Europe and every hide that won’t be needed in Europe will require an alternative outlet and an uptick in demand and consumption in other regions around the globe. This is what we have been waiting for for a long time already but it is just becoming even more important with the summer break in Europe.

In the meantime the news from Asia is not particularly promising. Pollution controls continue to dominate the news and as far as the dairy cow business is concerned buyers can pick whatever they like. From reasonable asking price levels to offers without price and ‘give best bid’ requests, everything is on the table. Only one thing is missing: confirmed trades at convincing and trustful price levels.

For quite some time we have been asking if all the cow hides around Europe were being sold and if so, where? There was never a straightforward reply. Now this is changing and quite few suppliers are admitting that they have not been moving many hides and have a good number stuck in their warehouses.

Apart from the problem of sales, for many the biggest problem is really the price at the abattoir door. Cowhides have needed a serious adjustment for months because the unsold hides have to be calculated too and nobody knows at what price they will eventually go. The market trend remains weak. Hide values continue to fall month by month and there is still not much on the horizon that would support the idea that the trend can be reversed in the foreseeable future. This means that the unknown revenues have to be worked into the calculation as well as the falling hide weights and the weak market trend.

If one looks at the abattoir prices for cows around Europe one does not have the impressions that adequate calculations have been made. The situation in the superior-quality section is a bit better.

There have been bids from China for better selections of hides that will allow tanners to make different types of leather from the standard types. These tanners see a solution in quality leathers, a focus on local and successful fashion brands and a larger diversity in the leathers they produce. This is only a beginning, but it is certainly a reasonable option for finding a solution to the problems in the industry in China. This has led to the sale of heifers and bull hides, which are usually not the items for China. Prices are nothing to celebrate and decent discounts have had be accepted, but if you want to open new doors in a market like this there is not much to gain anyway and the investments have to be made.

The number of sales were once again not impressive overseas, but at least some deals were done with a high probability that the hides will be shipped quickly. This means we will have quick feedback on whether or not these hides will mean something to these customers. In Europe business was once again limited to the regular programmes, now fixed until after the holiday break.

The kill: The kill remains low and on the levels one has to expect for the season. The FIFA World Cup will not help beef consumption either and weights are still going down. We are now heading towards the low points of the year before the kill should resume at the end of August.

What we expect: We will patiently for a magic wand to break the chains the market is caught in. So far we do not even see the magician. Politics are unlikely to create more confidence in the hide market this summer.

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	€ 0,90	Weak
	30/+ kg	33,5/35,5 kg	27/+ kg	29/31 kg	€ 0,85	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

German Perspective - 19.06.18 - leatherbiz: Lea

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German Perspective - 19.06.18