German Perspective – 18.12.18
18/12/2018
This is definitely the case in Europe, where tanners in almost all cases have already closed their purchasing activity. Many have reduced procurement as much as possible. Some because they consider that buying late means buying cheaper, others because they are lacking orders and can stretch their stocks, and others because they have moved into ‘hand-to-mouth’ mode.
Traditionally, the automotive tanners have the biggest impact on the market situation in Europe. They mostly make just-in-time purchases from this market. In the period of constant production expansion this meant that all suitable hides had a guaranteed delivery destination, leading to a rising number of origins becoming regular suppliers. The long supply chain and lead time from tanning to cutting, sewing and seat/vehicle manufacturing usually means small raw material inventories and rising stocks along the supply chain.
The positive trend in car sales peaked a while ago but because adjustments to production plans are typically slow in the automotive industry it took a while until the supply chain recognised this. Then, the congestion along the chain hits hard. Everybody tries to reduce their stocks at the same time and with fewer vehicles being made and sold suddenly the product flow stops.
The combination of most companies trying to reduce inventory and reduced sales and shipments means everyone now needs to reduce their input at a much faster rate than actual output has declined. For the raw material business, this means the raw stocks in tanneries don’t change much as they are always low, but with cuts in soakings and a call for reduced supplies the hides are now piling up in the hands of raw material suppliers who don’t know what to do: tanning or preserving them in the hope of a recovery of demand when slaughter declines in the New Year; salting and storing; or adjusting prices to make these hides globally attractive in order to conquer new markets and win new clients for this specific material.
In the meantime, tanners are employing various strategies to reduce purchases intakes, all this without risking suppliers and losing their grip on hides that could become important and needed again one day. The other hide types and the overseas markets remain in the same mood as in the last quarter. There is patchy interest every week and it is often a take-it-or-leave-it deal with very little room for manoeuvre.
In China, reports speak of large offerings from several European sources and impressive volumes are mentioned. Many are asking if these hides are already accumulated or if sellers are just trying to sell to make sure that hides are moving in the first quarter of next year. This is easier said than done as buyers either bid extremely low or buy in small quantities.
The good news is that there has been some relief in China after lines of credit were opened and deposits were paid for several contracts that had already been delayed. It seems indications that the recued tension in the trade dispute between China and the US has made buyers a bit more optimistic about their leather sales.
Overall, sales from last week again offered a mixed picture. Sales were made, but the numbers were not convincing and there was no dominating market or hide type. This suggests the figures were coincidental. Prices had to be marked down again, less for cows but more for male hides.
The kill: Butchers are now in the final lap for the Christmas season. There is an abundant supply of cattle but beef sales are a bit of a mixed bag. Weights are heavy and we would expect this to continue before fading towards the end of the week.
What we expect: Trade and selling will be slow this week, although there may be some latecomers. We should expect a round of buying from Asia for March soaking. How the buyers will play their cards remains unclear, however. They are certainly not in a rush and, correctly, do not expect there to be any shortage. In a market like this one, one should not miss out, though.
| 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 | € 1,60 |
Stable |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 0,90 | Stable |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 0,70 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 0,58 |
Stabilized | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 0,53 |
Stabilized | |
| 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 | € 1.50 |
Weak |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.40 |
Weak |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 0,40 |
Weak |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 0,80 |
Weakish |
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