German Perspective—29.07.08
29/07/2008
What happened this week: The summer has now finally arrived. In Europe tanners north of the Alps have mostly departed already for their holidays and in the south they are preparing for the same.
One final series of trips by sellers, mainly to Italy, took place, perhaps in an attempt to lock down some business for the time after the holidays, rather than just to pursue claims, payments or shipments. It remains to be seen if these trips had or will have much success. In general it seems that there is not too much to be had from visiting these areas at the moment.
With Europe being in slow gear, most of the attention was again on the situation in Asia. Despite all the negative reports the situation in the Far East is still far better than in Europe. Also this week sales into Asia were possible and with a bit of good timing on the currency market some of the price pressure was compensated.
The interest was again almost exclusively in males and ox/heifers, but also interest for some low grades was seen. In the end the number of sales was not anything to be excited about, but the numbers were again pretty acceptable for the time of the year.
But for the mood of entire misery surrounding the cow market the situation would certainly not be as bad as many see it. It is probably a bit like the weather forecast with actual temperature at 10 degrees, but the temperature sometimes feels like minus-10, or even minus-25 with the wind-chill factor.
A lot depends today how you feel and which conditions you are exposed to. While in the past the global market for upholstery cows was always pretty well balanced with a steady production, and either the Italian or Asian tanners active in the market and the US dollar exchange rate being the guiding factor for European suppliers, the situation has been very different since April.
All main centres for the consumption of upholstery hides are in trouble, and even where there is demand, there are production restrictions due to the Olympics. This leaves pretty little option for the coming months. There is no sign, that the restrictions in China will ease before the end of September. The disastrous conditions and business in Italy have been sufficiently complained about already, not to mention the coming four to six weeks when the industry will be on holiday with no one bothering about production at all. So, if there is no alternative on offer for the consumption of cow hides, or Asian tanners take an early gamble on an improvement in the market situation right after the Paralympics close in mid-September, we could still see a pretty difficult summer.
The worst is that there is no real and fair market valuation possible for the material. If the general mood were not so poor or the outlook in the automotive industry so negative, then dairy cows are not far away from being an attractive option for a number of leather productions. But with hardly anyone working seriously on ‘alternatives’ today, not much movement can be expected in the short term.
The kill: Being right in the holiday season in our part of the world, the kill is as low as anyone could expect. Nobody is missing hides at present and so it is no good for cost structures, although no one is building up stocks of hides for the time being. Weather and holidays mean no one expects a better kill until mid-August.
What we expect: It seems that the male market has levelled out for the moment and, with the US dollar firm for the moment, there might be more chance for sales. We expect another week of negligible production. For dairy cows, however, it may be time, finally, to prepare some warehouse space for them, in which case we will also have to have some tranquilizers on hand, most likely until September.
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