German Perspective - 03.03.15
03/03/2015
Email traffic increased and many agents and customers were asking for offers and quotations. Many consider this as an increase in interest, but we would say it was more sniffing around and checking to see if the general market conditions had significantly changed during the days of absence. We have to admit that we have never seen such a quiet holiday period in Asia as this year’s. Normally you always see some activity, even if it was only that people were bored enough by family dinners to start sending a few emails around. This year it seemed that the people were really taking a holiday and had either nothing to bother about or did not want to bother about business at all. It might also be related to the fact that the year of the sheep is not considered to be the one with the biggest amount of good fortune in the Chinese calendar. Having said this we have to admit that in the end we were a bit disappointed with the final results Friday afternoon.
However, it might also be related to the fact that even the Chinese were waiting to know something about the impressions from the leather fair in Milan and possibly also to learn from their US suppliers about the shipping situation after the end of the West Coast ports strike. This is easily understandable considering the lack of clarity around how many hides have become stuck, how much congestion there is in the pipeline and how long it will take until the schedules are regular again.
All this is definitely a determining factor in explaining why Asian customers are so active in other markets and origins. The information remains pretty unclear and speaking to the shipping lines directly they believe it will be some time before everything is regular again. Under these conditions one would expect that tanners would be far more panicky about the raw material supply, but we fail to see any sign of that. Nobody is pushing for quicker shipments and also payments and letter of credits are not coming in any sooner than planned.
The situation in Milan was also a bit of a mixed bag. The number of visitors was not too bad, but the activity on the stands seems to have been seriously less than in the previous years. Something has definitely changed and in our opinion it is a change to the seemingly indestructible belief that there could be no end to spending on luxury leathergoods at whatever price. Many brand names have been quoted to be far slower in their orders and quite a number are talking about decent inventorying along the pipeline and and retail level.
A generally warm or late winter has also failed to clear inventories for the winter season the way people were hoping for and, as if that were not enough, the situation in Russia has stopped quite a large part of the activity in shoemaking in various regions of Italy. All this has left only a few people reasonably happy and confident about business while the number of concerned faces was quite large in the shoe and leathergoods sections. Upholstery is still not easy, but several specialists and high-quality manufacturers were at least reporting a little improvement after quite a disappointing season.
If we draw a bottom line we think it is fair to say that the main problem in the leather industry is still price and the massive imbalance in demand between the various quality levels. If you calculate the average return for the standard raw material you simply do not get to the prices that raw material costs today. Knowing this, hardly anyone is interested in any major price changes at least not before the stocks of unsold selections are moved.
Sales this week have again been well below average. Most of the sales were just the renewal of regular programmes rather than any spot or additional interest as a consequence of leather demand. Prices were almost steady again thanks to the exchange rate.
The kill: The kill has been through the worst and numbers picked up slightly during the week. We understand that this trend will also continue in the coming week.
What we expect: Now we have to wait to see what the Asians decide next week when everybody is back at their desks. With the help of currency rates, we should be able to see another week of stable prices and it seems all are now trying to carry the market into Hong Kong.
| 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 | € 2,35 |
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 |
€ 1,90 |
Steady | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2,25 |
Steady |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2,20 |
Steady |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 2,05 |
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 | € 1,80 |
Steady |
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