German Perspective - 04.10.16
04/10/2016
September had a late start really considering that we are entering the high season of leather production and the raw material pipeline for the leather industry needs to be sufficiently replenished. This is particularly the case if we consider that shipping times have been extended and it takes around two weeks longer today to reach destination and a number of containers with raw hides got stuck due to the failure of Hanjin Shipping.
So, except for the high end, the automotive sector and the large industrials, the industry has had quite a sluggish start to the winter half. It took until last week to get the balls rolling again. There is nothing to get enthusiastic about, but leather demand is never zero; it only fluctuates and so the problem remains price in some parts of the market and demand in others. Anyone who can supply the steadily running businesses described above has seen almost no decline in price or volume, but the rest have to deal with reductions and will need to fight for market share in the coming months when the most competitive raw material will make it into the production lines.
From our perspective, the different raw materials haven’t found their real value yet and some still need major adjustment to find their place again in the priority list of the purchasing options. In the meantime the seasonal uptick in production is slowly beginning to be reflected in raw material demand. Interest in hides that are adequately priced has gone up and regular sales have been re-established. This applies, however, only to material that can meet price targets (mainly cows and low grades so far). In the male section the only buyers willing and in the position to accept the present levels are the automotive tanners, and to a very limited extent the high-quality heavy leather tanners in Europe.
For the remaining hides, which have to compete on the international market with alternatives, the situation is totally different and males in the range of 25-40 kilos are completely overvalued. It is going to be very interesting to see how this problem is resolved.
Sales during the week were normal and sufficient for all the grades that fit into the price range. Upholstery- and bag-related raw materials are doing much better than shoe-related ones. Prices for sold material were reasonably steady and only low grades had to accept further downside adjustments. The main target is now to adjust prices at the abattoirs to the market-price realities that have developed over the summer. Hide prices have to match the leather prices first and not the targets of controllers.
The kill: The kill remains strong. In particular the numbers of dairy cows are impressive and everything points in the direction of numbers remaining high for some time. When the temperatures fall we will also see the kill of males increasing.
What do we expect: This week the Chinese are on holiday. This should reduce sales and interest from Asia. This leaves some time for the abattoir negotiations and to get things right on that side. We would be surprised to see any major prices changes soon, but lighter-weight male hides still have to find their levels.
| 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 | € 2,20 |
Weak |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 1.55 |
Weak |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 1.70 |
Weak |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 1,40 |
Stabilizing | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 1,35 |
Steady | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,90 |
Weak |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.90 |
Weakish |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.80 |
Steady |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 1,10 |
Weak |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 1.25 |
Steady |
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