German Perspective - 11.7.17
11/07/2017
Every year it's becoming a bigger challenge to handle the holiday season. People are looking for their annual leave and when the school holidays also fall in August it difficult to motivate staff to handle the increased amount of hides and to cure them instead of just chilling and shipping them.
The production cycle of tanneries in this part of the world is in conflict with the supply and slaughter periods. Generally, it would make much more sense to keep beamhouses open throughout the summer period - possibly with reduced capacity - or to run beamhouses with reduced between May and September and to make it up during the winter season when the kill is higher.
This would adjust tanning and the demand for fresh hides to the general availability. It would also suit the workforce to extend hours in the dark and cold autumn and winter and to have a bit more free time to enjoy the spring and summer. However, it is unlikely that this is going to happen.
Many players are complaining about the reduced activity in the market. However, this is not unusual. Traditionally there was a flurry of business before tanneries shut, because they have to plan their raw material stocks and to secure supply for after the holidays. Generally, this happened in July.
Only in the past few years activity from Asia and, in particular, from China offered more business in summer. With the structural changes in the Chinese tanning industry a lot of this demand has disappeared for the time being.
In Europe we see a focused interest for particular grades from tanneries that have a clear picture about their business in September. However, this kind of activity plus the coincidental sales that are still taking place in Asia are not good enough to lift the fundamental feel of weakness in the market. The demand for leather is not sufficient to clean up the complete production of hides.
It is unlikely that we are going to see an increase in leather orders before the end of the summer.
Decisions about materials and orders are normally taken in September. Considering the automotive business is signalling lower performance there is very little hope for a trigger to turn the market around.
Business during the week has been once again rather sluggish. It is not completely dead, but the number of bids and the volumes remained limited. There has been a reasonable amount of interest for low grades and cheap hides. This was not really expected, but confirms the general pressure on leather prices. Sales were sporadic and prices on the weak side of steady.
The kill: The kill and the number slaughtered continue to remain on the reduced summer levels. Hide weights are finally at the low levels one has to expect at this time of the year. In particular, the weight of cows has come down. We would be satisfied if the numbers stay in these levels until the end of August. However, it is more likely that we will experience weekly declines.
What we expect: Changes of prices would possibly not change the volume of business and so it is likely that most offers will continue to remain in a very small range and nobody will test the market yet.
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