German Perspective - 26.05.15
26/05/2015
Whatever, leather business in Europe is traditionally slower in the second and at the beginning of the third quarter and so it will be this year. Only the current order books of the automotive industry will keep suppliers busy, while many other sectors are going to slow down from now on. Only six weeks from today the first drums will stop for the summer holiday and only start turning again at the beginning of September.
We have been happy in past years that lead-times are different in the different parts of the world, always allowing us to bridge the low season in Europe with expanding exports and shipments into Asia, in particular to China. At least at this stage, it seems the situation is going to be a bit different in 2015. Indications, the information and the situation in the main global market for hides and skins all look different this year. The economy and the condition for leather making in China no longer represent the same conditions we saw in the boom phase, until maybe a year ago.
For various reasons we are in a period of consolidation and it seems that the Chinese tanning industry is going through a similar period of boom and bust to what we have seen in various regions of Europe in the past decades. In China everything just happens faster and in a more compressed period of time. If we are right, then we are now in a period of consolidation of the industry and we find very few indications that the summer of 2015 will see any turnaround in the process. So we might miss some of the support from that part of the world, which we were used to in past years.
A lot points into the direction that we are (fortunately) in an orderly retreat of prices mode and that this might remain the major market condition for some time to come. Obviously this applies more to the medium-lower end than to the premium segment.
A number of people have been trying in recent weeks to call for a stabilisation and rebound of prices. At least from our perspective this is premature, without saying that we are in a classical bear market, in which prices fall from week to week. We are still very happy with the moderate decline in market conditions. We actually don’t see too much demand and we have to admit that we are very happy that we can rely on our regular customers who are really sticking with us through the good and the bad times. This has kept business activity below par, but still moving.
The main part of sales was again generated in Europe, while interest in Asia was rather patchy. The weaker trend of the US dollar has stopped for the moment and the dollar has gained about 3% against the euro. While not solving anything, this is certainly reducing the pain. The total number of sales this week did not make us very happy and in particular the percentage of hides sold to Asia was well below average. Prices can be called weak-to-steady with prices from Asia being compensated by a better currency rate.
The kill: The kill remains at pretty low seasonal levels and the main problem is the falling average weight at this time of the year. This week will be shortened by another holiday and beef business is said to be pretty stagnant. Consequently we do not believe there will be any significant change in conditions for the weeks to come.
What we expect: Abattoir prices moderately corrected in the month of May and we don’t think that any supplier feels too pressed about taking serious decisions on pricing for the weeks to come. This means that the situation is the same as it is all over the world: everyone is watching to see what others will do and new triggers to pricing will have to come from other origins, if anything is to happen. This is not bad when the markets are moving rather softly, and we think the trend remains softer.
| 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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