German Perspective - 12.5.15
12/05/2015
However, this year, once again, the faces in the hide market were getting longer. In reaction to the exaggerated levels we had seen for so long, adjustments were taking place which were also dependent on currencies.
In Europe the corrections have been pretty limited so far, because the weaker euro still offering enough shelter to protect against major price adjustments. Margins are eroding and the falling hide weights are adding to the problem.
The price adjustment we have seen overseas have left only limited traps in the European markets. Price corrections in dollars remained within the range of $5 to $7 per piece, which took away all the good margins of the first quarter, but prices all over Europe remained pretty stable and variations are limited to a few cents.
This week we came to the next junction and the European suppliers were watching how the market overseas is behaving. Fortunately, suppliers on the other side of the Atlantic decided that the declines had been enough and began to claim the bottom has been reached. Some even had the courage to raise asking prices again.
Demand and business never comes to a total standstill. Many may have played the market wrong, but some played it correctly and have taken the opportunity to buy material.
Others are burdened with expensive inventory, with the major problems in China. There is a critical cocktail of reduced leather demand, high stocks, rising production costs, currency issues and cashflow problems. The side-effects are obvious and the issues are becoming time-consuming.
However, those who are not too exposed to the Chinese market might even have had a decent week. There was business around and buyers were aggressively trying to bargain hunt, but in the end the good customers were willing to compromise and acceptable quantities of hides could be sold and placed outside China.
Most of the interest from the Chinese mainland had to be turned down, because the buyers were simply too aggressive in their price ideas.
Many tanners are trying to upgrade their production, which made it relatively easy to sell the upper end of the quality range.
To our surprise, we sold a reasonable number of bullhides for the first time since the beginning of the year. The other grades were a bit slower and in particular dairy cows were facing aggressive headwinds. There were plenty of bids, but they were simply too low to consider. We were reasonably satisfied with the volumes of sales, but the generally lower kill makes it a bit easier to move the production.
The kill: Beef demand remains well below expectations and this is reflected in the low numbers. Slaughterhouses are not really selling what they are producing and there is hardly any indication that the situation is going to get any better for some time. Weights continue to fall and we don't expect that the kill is going to change very much in the coming weeks, considering the holidays we are expecting.
What we expect: A bit of the pressure might have been lifted now, however to claim, like many do, that a correction is already over might be premature. A few weeks with steady prices and sales would be appreciated.
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