German Perspective - 04.07.17
04/07/2017
We are dealing with a similar pattern in Asia. Most buyers seem to have filled their supply pipeline sufficiently for the moment and the only question that remains is for how much longer this will be the case. Will the quantities be enough to get them through the summer until the time when new leather orders are placed? Are there still gaps that need to be filled before then?
One thing is for sure; tanners are not fearful of a supply or raw material shortage. If low kill figures or good sales are mentioned, the buyers just shrug their shoulders and remain unimpressed. Nothing seems to be able to move the market. Sellers are showing the same attitude as buyers, similarly unimpressed by any news.
As far as Europe is concerned, the situation is simple; better quality hides from reliable suppliers are still finding sufficient demand from premium tanners and so no real price pressure is building. Having said that, it is also true that smaller suppliers with less volume and lower quality and supply standards are having difficulty finding enough interest outside the supply highways of the industry. With the increasing dominance of the industrial “mega-players” there are very few smaller outlets able to take this kind of material. In most cases the volumes are still too small for sale overseas. This leaves only a handful of niche producers as potential buyers, but their requirements are special as they are generally too small to absorb any surplus of this type of raw material.
It is fair to say that the market within the European quality community remains pretty stable and that the demand is still enough to absorb the reduced kill. The situation is much more difficult for any surplus material that traditionally finds a market in Asia.
The moderate, but steady, decline in the value of the US dollar, and the tight price discipline of suppliers in the US and other regions continue to make European hides look expensive. This is making overseas sales increasingly difficult, at least at prices that would cover the raw material cost at the slaughterhouses. This could lead to a similar situation to last year. A lack of real price adjustment over the summer means the competitors at the abattoirs are reluctant to take risks and so eyes remain tightly shut until the end of the summer season in the hope that a miracle will happen. This isn’t going to solve the problem. The miracle didn’t arrive last year and there is no sign of one being on the horizon this year.
Real business last week was slow and the majority of interest was from China for low grades. It is evidently bargain-hunting time again and bids were well below asking levels. In most cases bids were $3-4 under the market level and with the lower value of the dollar there wasn’t much to discuss. Some small lots came out of the blue and were booked at market levels. For the more standard grades the currency factor didn’t allow any more sales to Asia.
The kill: The kill continues to oscillate around the normal summer levels. We have heard that the kill of males in other regions is exceptionally low but in this region, it is at the level we would expect for this time of year. Weights are generally lighter for cows than we expected, which seems to confirm that the kill of old animals, in view of last year’s milk price crisis, has begun. Not much should change from now until the end of August.
What we expect: Activity in Europe will now fade, coming almost to a standstill in August. Asia is still unpredictable because of the uncertainty over whether there is a need or desire to buy more hides. The strength of the euro will make it difficult for European suppliers so it is likely we will continue to trade in very narrow ranges with a generally weaker undertone.
Share this story:
