German Perspective - 23.4.19

23/04/2019

What happened this week: Although Easter is not a real break, one got the impression that the industry decided Easter should be like Christmas. This week was almost as quiet as the week before Christmas used to be. Around the world, we heard tanneries were slowing production or closing over Easter. This reflects the reduced demand for leather and the subdued outlook until the summer holidays. Most tanners have given up believing in the long-awaited increase in leather orders and have taken the decision to adapt production to sales.

Until now, many tanneries were holding production stable and producing either for stock in semi-finished or hoping for a recovery.

For most supply chains in the leather industry, the faith has faded and once again. For some, hopes are pinned on automotive leather OEMs having to turn their budgets into reality within 4-6 weeks. This makes sense, because the new model year starts in September. However, so far nothing has materialised. There didn’t appear to be many changes at the Shanghai Automotive show. Electric cars are big news and all companies, including lots of new players from China, displayed vehicles that are mostly based on SUVs. We will have to wait to see which kind of interiors customers will order.

We can only reiterate what we said last week: manufacturers will promote the material that makes most profit and so one must believe that leather in car manufacturing has peaked and can only be compensated by a recovery of sales.

In the other sectors we are entering the low season, except those with long lead times, and the Thanksgiving and Christmas stock are made in the coming months.

For the entire leather industry, the decline in the shoe industry is still dominant. Many tanneries reduced production, but with no rise in demand expected, decisions about the future must be taken. Close or fail are the only remaining options for many.

Sales this week were once again rather patchy. Being linked to a successful tannery still a secures a reasonable and stable turnover. If not, it is tough, and this is reflected in the wide range of prices for similar descriptions.

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	€ 0,80	Weakish
Dairy cows	15/24,5 kg	22,5/23,5 kg	13/22 kg	20/21 kg	€ 0,70	Weaker
	25/29,5 kg	27,5/28,5 kg	22/27 kg	25/26 kg	€ 0,60	Weaker
	30/+kg	33,5/35,5 kg	27/+kg	29/31 kg	€ 0,55	Weaker
Bulls	25/29,5 kg	27,5/28,5 kg	22/ 27 kg	25/26 kg	€ 1,35	Pressure
	30/39,5 kg	36,0/37,0 kg	24/34 kg	31/33 kg	€ 1.35	Pressure
	40/+ kg	45,0/48,0 kg	34/+kg	38/40 kg	€ 1.20	Pressure
Thirds	15/+kg	25,0/27,5 kg	13/+kg	24/26 kg	€ 0,40	Stable
Thirds bulls	30/+kg	38,0/40,0 kg	24/+kg	33/36 kg	€ 0,55	Weak

Sales were once again underperforming and prices for hides sold were from steady to 5% lower and we heard of even lower ranges. Females have a more adequate price level than males, which struggle to find any new clients outside their core customers.

The kill: The kill this week and next is cut short by the Easter holidays. Beef sales are not brilliant except for fast food and convenience. We expect the kill to fall slightly.

What we expect: The fundamentals remain the same. Prices may stay stable on paper, but those needing to sell will have to accept less. Successful supply chains generate better returns while spot deals will be price related. The downward trend remains intact and a lot must happen before we can find a solid base again.

German Perspective - 23.4.19 - leatherbiz: Lea

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German Perspective - 23.4.19