German Perspective - 23.06.15
23/06/2015
Europe is slowly winding down and many tanneries have already made their plans until the shut-down in August and business is just strolling along without much excitement, although quality producers still seem to be quite steady in their productions. At the same time hardly anyone is willing to make a forecast about what they expect for the second half of the year. Automotive tanners do not have any order cuts yet, but they know from previous experience that these can sometimes come quickly and out of the blue.
Everyone is following the news and there is increasing concern about the general economy. The problems with Greece, the Ukraine conflict, the slow-down in China combined with a possible stock-market bubble and less promising news from the US economy combine to make people far more careful, even when they still have stable order books. At the same time, the crisis of the leather industry in China is widening. The hope for a recovery of the industry there is fading and it seems that even the smaller Korean tanning industry is far more busy than the giant across the sea.
The majority in the trade is beginning to wonder if we are still in a phase of correction and consolidation or if this is the beginning of a new era and new cycle. There is massively deflated demand and production capacity there; the larger production capacity of recent years might never have been real and might instead just have been driven by hope and speculation.
Under normal circumstances we should be in a period of re-balancing. Being honest, everybody with a bit of experience must know that the raw material pipeline has been overloaded for a long time with plenty of goods stuck and accumulating left and right. These expensive, excessive stocks of raw hides, wet blue and crust need to be liquidated and digested first.
Another problem in this market is that falling leather prices are forcing tanners to seek further reductions in raw material prices and so the trend is compounding itself. It requires strong hands to get step in to turn things.
We have become very used to high prices in recent years but it should not be ignored that raw material is still above the long-term averages and even after adjustment is not particularly attractive, even to cyclical buyers or investors.
Tanners with good order books can stretch their stocks, while Asian buyers are not really famous for buying in a falling market. Consequently, this week very quiet. Thanks to the regular buyers in Europe there was still some movement but the classical Asian hide types are generating little interest and any bids are so low that most sellers are not willing to take them despite the grim outlook. Fortunately the kill is at its lowest level of the year so hides are not yet piling up in big numbers.
Sales this week were below expectations. It seems that tanners are far from thinking about purchasing hides. Prices in Europe were moderately lower with the only exception being heavy and good-quality bullhides for which low production is still holding supply and demand in balance. However, for how long can this isolated market escape from the general market trend?
The kill: The kill remains low but was a fraction better.
What we expect: Without a reaction from Asian buyers, it is pretty useless to speculate about the market price level. Talks and rumours are no market and it is useless without a certain volume of sales to join any pricing philosophies. The situation had been ignored by most of the big hide producers and shows again that you can delay, but not avoid.
| 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 |
€ 2,10 |
Weaker |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1.80 |
Weaker | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,75 |
Weaker | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 2,20 |
Weaker |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 2,20 |
Soft |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 2,00 |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,60 |
Stable |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1,75 |
Stable |
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