German Perspective—20.01.09
20/01/2009
What happened this week: The market situation remains in pretty much the same status as in previous weeks. The trade is still waiting for positive signs that could change the situation for the better.
Some speculative forces seem to think that the markets have hit the bottom and are trying to regain market share for the better times ahead. Well, being realistic about the situation there are still very few signs that actually would suggest any short term improvement. Trading is still light and focused on a limited customer base.
The tanning industry in Southern Europe returned this week from the Christmas and New Year holiday and the early information they have sent out was not very encouraging. The complaints of last year are repeating themselves. Leather buyers not paying their invoices on time and there is a persistent lack of finished leather orders. Time is getting tight for many of them.
With reduced orders and production, and the long break, cash is getting tighter every day and complaints about late payments of leather buyers are also constantly rising. Also from the automotive industry there is only bad news. Sales, inventory and production are out of balance, which means further production cuts along the pipeline.
Suppliers’ problems are becoming deeper all the time and seat manufacturers are facing serious trouble. Some of them are already in serious financial problems, and others are suffering from cancellations of their credit insurance.
The key problem, in the western markets at least, is that nobody has any idea when demand is going return again and production can run once more and match actual orders.
There is hardly anyone in any industry reporting a normal order intake or reliable order forecast for the coming two to three months. China, where a longer than usual New Year vacation is about to begin, is also suffering from almost complete uncertainty over export orders, despite the fact, that we are presently in the low season.
The fair season is starting now and we hope for some indications from the upholstery fair in Cologne and the leather fair in Chennai or the shoe show in Italy.
Trading has remained pretty light. There were a few sales to China before the holiday shut-down, but nothing really important. In Europe, the trade was busy talking about low prices, and the levels reached for European hides make it hard for any other origin to compete. However, it seems that hardly any business was concluded.
Many report that there are decent stocks around and it seems that supply is still bigger than demand. Hide prices are certainly not prohibitive at the moment and in many discussions calculations are made that show that the leather could be offered in price-quality ratios never seen before, because high quality hides are cheaper than ever, forcing lower quality hides out of the picture completely.
Many tanners are tempted to replenish their stocks assuming that good quality material is hardly going to get any cheaper than this, but who knows?
The kill: The kill remains at decent levels, and numbers are still better than one would expect for this time of the year. However, anything other than a moderate descent into spring would be a surprise. Weights, in particular for cows, remain on levels below the normal seasonal average.
What we expect: We still cannot find many arguments in favour of predicting a turn for the better. China is now winding down completely and limited activity can be expected from that part of the world. The shoe industry is in the low season and automotive is still in trouble. Stocks are abundant. It will require another strong round of buying to really push the market again. Before mid-February this is unlikely.
| 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 | € 1,30 | Struggling |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1,20 | Struggling | |
|
Dairy
cows |
15/24,5
kg |
22,5/23,5
kg |
13/22
kg |
20/21
kg |
€ 0,90 |
Struggling |
|
25/29,5
kg |
27,5/28,5
kg |
22/27
kg |
25/26
kg |
€ 0,80 |
Struggling |
|
|
30/+
kg |
33,5/35,5
kg |
27/+
kg |
29/31
kg |
€ 0,70 |
Struggling |
|
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,20 | Struggling |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 0,95 | Struggling | |
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 0,80 | Struggling | |
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 0,60 | Struggling |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 0,60 | Struggling |
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