German Perspective - 19.05.15
19/05/2015
Although many see prices stabilising, we still have to deal with the fact that official price lists and market realities have wide gaps. The easy time for European exporters is fading quickly and all the shelter we got from the international raw material markets and the currency situation has disappeared. Welcome back to the real world.
All this only applies of course to hide grades that are in competition with other suitable origins from around the globe. The premium end and specialty items that are mainly manufactured still in Europe are not really facing the same headwinds. This means a two-tier market, with reasonably steady conditions in the heavy and premium end and serious price pressure for the more commodity types.
The trade finds it pretty difficult to convert this into new pricing and negotiations with the abattoirs are increasingly difficult. It’s very complicated to explain why some isolated hide types are facing serious price pressure while others can still protect themselves against the trend. It’s the wrong time of the year too, with the kill and the weight of hides falling, which is already making calculations difficult enough.
The biggest problem, however, is the different positions of the various players in the market. It is extremely difficult to figure out how the market is going to handle the balance between supply and demand over the summer. On one side it is pretty obvious that the leather demand is not going to pick up in the months to come. Budgets and production plans have been made, the summer holidays are ahead of us and the only thing that could really boost raw material demand would be speculators buying in expectation of a serious uptake in leather business in the second half of the year. One would need a lot of confidence and courage, or strong backing from customers, to see today’s price levels more as an opportunity than a risk.
It is pretty difficult to find indications of a strong recovery in leather demand because most collections and material budgets for 2016 have already been decided and this happened when we still had excessively high raw material and leather prices.
This week was reasonably quiet and interrupted by a holiday for Ascension Day on Thursday. This made it quite a short week, but the relaxation of the holiday was not greatly interrupted by too much activity from overseas where it was a normal working week. Sales were mostly concentrated on the classical European hide types and this means in our case automotive-related material. Steady demand from some of the premium brands in combination with lower weights and lower kill is still offering some sales opportunities to fill production gaps.
Anything we have seen from Asia has been at lower prices versus a week ago and the falling dollar was sweeping some more euro revenues away. All in all, a pretty quiet and uneventful sales week.
The kill: The kill remains pretty bad and the holiday for the Ascension last week and for Pentecost on Monday next week will keep production at a very low seasonal level.Weights are declining too and beef demand is said to be pretty bad.
What we expect: With the changing fundamentals, the European market has to find a new level. At the moment everyone is still trying to keep continuity. However without protection from the currency market it will be very difficult to continue. If nothing serious happens we have to be aware that another correction in prices is inevitable, certainly more for the medium-low end than for the classical premium hides.
| 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 |
Soft |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 2,05 |
Soft |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 2,25 |
Weaker |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1.95 |
Soft | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,85 |
Soft | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2,25 |
Weaker |
| 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 | € 1,75 |
Stable |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1,75 |
Stable |
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