German Perspective - 06.08.19
06/08/2019
The demand for better-quality leathers may also have suffered, but little if at all, and tanners in this segment and with orders in hand have had a very attractive margin trend. To gain even more momentum, they also actively talked the market down and were just buying the minimum to take full advantage of the price correction.
Slowly, a number of these tanners began to realise that the long-term market logic must apply. The main points flowing from this are that there are never good selections without bad selections, and that any effort to filter out the bad selections is only possible at higher cost. The good selections have to compensate for whatever is lost on the low selections. This logic may sometimes be temporarily suspended, but not erased.
The biggest complication is to reach a balance again. What used to be just a price mechanism in the past has now expanded to become a problem of disposal and this means, in the worst case scenario, having to pay to dispose of low-grade hides because it is not worth paying to tan them.
Week by week, the numbers of buyers looking for better material rises and they all apply the old rules to reach their price ideas and targets. They are then extremely surprised when they learn that the price premium required to avoid having undesired selections too has substantially increased. Although we are sure that many tanners understand the situation completely – for the simple reason that exactly the same applies when it comes to leather sales - they are reluctant to follow. With the type of enquiries one gets, it seems rather that they are walking around and knocking on every door to see if there are still any bargains to be had or any suppliers who take a more favourable point of view.
We would not be surprised to learn that the present trend might intensify in September and October. While we do not see any great change for the lower selections we think that the higher end could cause various surprises. The fundamentals will not change and without a solution for the low end the industry will have to pay an adequate compensation for the rest.
Trading this week was once again very, very light and just a handful of smaller sales were made, without any clear direction. Interest was once again for the better end and sales were at full asking levels.
The kill: The kill has dropped and has finally fallen to the normal holiday levels. For the first three weeks of August we think this will not change before production slowly rises again. Weights are low too, but still a little higher than in the past.
What we expect: Many are on holiday now. The industry in Europe will not bother much about the situation, knowing that nothing will change until their return. The next directions regarding leather demand in total and how the mix will be spread will be set between the end of August and the end of September. This will then set the tone for the rest of the year and we are ready for fundamental changes.
| 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 | € 1,20 |
Stable |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 0,65 | Stable |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 0,65 |
Stable |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 0,50 |
Stable | |
|
30/+kg |
33,5/35,5 kg |
27/+kg |
29/31 kg |
€ 0,45 |
Stable | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,20 |
Pressure |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.20 |
Pressure |
|
| 40/+ kg | 45,0/48,0 kg | 34/+kg | 38/40 kg | € 1.05 |
Pressure |
|
| Thirds | 15/+kg | 25,0/27,5 kg | 13/+kg | 24/26 kg | € 0,30 |
Weak |
| Thirds bulls | 30/+kg | 38,0/40,0 kg | 24/+kg | 33/36 kg | € 0,45 |
Weak |
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