German Perspective - 30.09.14
30/09/2014
At the same time many Asian tanners feel massive pressure on prices and margins, leading a number to test the option for less volume, but higher-priced articles and for them, too, EU options came into play in form of trial orders. The US dollar beginning to rise at the same time lifted the price levels obtainable, which left a completely positive impression for those not looking at it from a wider perspective.
None of the above was the consequence of better leather business, but just the result of a momentary price situation and when the immediate appetite was saturated everything slowed down again, at least until the tanners have a clear picture of what they can expect in terms of leather prices and order volumes for the next season and this is still under discussion among many finished leather clients. So far, it doesn’t seem that leather prices are showing much potential on the upside and, quite the reverse, many are checking the possibility of using cheaper options, avoiding leather if they think it is too expensive.
So, we see two trends. Many Chinese tanners are under the pressure of higher production cost and record raw material prices, and they understand that they have to shift into higher price and higher added value leathers or they have to find cheaper raw materials that can be made into leathers that will still be accepted in the market. This is changing the balance of the market and it means that many players, tanners and traders, have semi-finished stocks that they cannot use anymore in their programmes. This means that they are holding onto them or trying to sell them off.
This is adding to the stocks that have already accumulated, so we even if raw material is not so easy to find, there is plenty of wet blue and crust around. During the summer and in a firm market people might not bother too much, but in the last three months of the calendar year, end-of-year balance sheets begin to lurk around the corner and stocks become an issue for accountants and management. There is not too much time left to get rid of them, have them shipped and paid and that means finding customers who either need the product or who might be enticed by price to take the product into their own warehouses.This is in direct conjunction with the leather demand in general and there are actually very few indications that demand will exceed last year’s, which is what would be necessary to clean up the excess of material that has built up since the spring of this year.
Interest was still there this week for premium male hides as a substitute for US steers. There were enquiries for cows, but very little business booked at the end. On paper and with the tailwind of the US dollar one would have expected some upside potential, but it did not materialise. So sales were rather patchy and limited to a few low grades and medium-weight males with prices steady.
The kill: The kill went up again and the first colder nights helped as well. There is enough cattle around and we would not be surprised to see even higher numbers in the weeks to come. Although predictions are difficult, we would not be a surprise to see high numbers until Christmas.
What do we expect: It seems that we might see the first cracks in optimism in the next weeks. We are cushioned by currency exchange rates and so the pressure could be eased a bit for us, but fundamentally we would need a purchasing rally to build forward positions again. Apart from that we will watch the situation of payments and wet blue stocks carefully because they might become the indicator for the market trend eventually. For the moment however, we think this coming week will not see much market variation and everyone is still waiting for the trigger to be pulled.
| 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 | € 2,45 |
Steady |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 2,10 |
Steady |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 2,30 |
Steady |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 2.00 |
Steady |
|
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,85 |
Steady | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2,30 |
Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2,30 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 2,15 |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,80 |
Steady |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1,75 |
Steady |
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