German Perspective - 16.10.18
16/10/2018
If we look at the activity and interest we receive from China it seems that tanners there consider their business prospects for this, usually busy season as not very positive. We have reached mid-October and anything we sell now is unlikely to arrive at the tanneries before mid-December. Considering the break for the Chinese New Year holiday (February 5) there is actually not too much time left for large-scale production for the busy season between now and the end of April. There can’t be too much optimism in the tanning industry in China or tanners would grab the chance of very low raw material prices. Maybe general worries about the global economy play an important role too. No matter what, it is pretty obvious that the demand for leather continues to be far below that of previous years and this is creating the situation we are in now.
There are no reports of any substantial increase in leather demand from other south-east Asian countries or the Middle East and it is not just that there is no shift from more expensive China to less expensive other origins. Consequently, it remains the case that insufficient demand for commodity leather types continues to make business pretty difficult.
A regular throughput of all hide types is almost impossible to achieve at the moment. This week offered a taste of what the global economy might have to deal with in the near future: turbulence on the financial markets with the rise of general uncertainty. The entirely bright future which we had seen with cheap money in the markets for so long had the first clouds on the horizon.
This could also hit the specialty and high-end market for leather products. The present performance of this market section is still brilliant, but who knows what would need to happen to change the tone. In automotive we already have some idea; almost every brand is reporting sales declines, justifying them with all kind of different excuses. In Europe it’s the new emission laws, in the US it’s higher interest rates, but, all in all, the production of vehicles has seemingly peaked.
Whether we like it or not, the general pressure on hide prices and the subdued demand are now also reaching the heavier male hides, for so long Teflon-coated against the market troubles we have already seen for females and lighter-weight hides. The very top end of the quality range is still successfully resistant, but the next level faces substantial headwinds.
We stated some time ago that one way or another a big gap has developed between female and male hides, as well between super premium and the upper average levels. At the bottom end of the range a surplus continues. It is not surprising that owners are unwilling to confirm their unsold stocks of low grades, but day by day more of the reality is becoming public and if one looks at the price structure at the bottom, one wonders why any of the low grades should be bought by a tanner today. Price is not stimulating leather demand so making prices cheaper is not the way to create more market demand.
Sales this week were once again uninspiring. Except for the regular programmes, not much interest was seen and prices continue to be under pressure.
The kill: Fantastic October weather has kept the grass growing and farmers are not yet rushing to sell cattle. The large number of female hides coming in remains remarkable. This does not leave very positive indications for the cattle herd in the long run.
What we expect: Well, the trade should rush to get a plan B ready. Also for the next round of abattoir buying it seems that a good part of the trade still does not see the writing on the wall. We are missing any explanation of where new leather demand is going to come from to absorb the rising kill we have to expect in the coming months. Without a convincing story, we have to remain as sceptical as we have been for a long time.
| 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 | € 1,05 | Stable |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 0,90 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 0,70 |
Weakish | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 0,60 |
Weakish | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,50 |
Weak |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.60 |
Weakish |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.50 |
Stable |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 0,60 |
Weak |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 0,80 |
Steady |
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