German Perspective - 17.10.17
What happened this week: Those hoping for some clarity in the week after the Lineapelle fair in Milan must have been disappointed. Leather production in Europe runs at a normal level for the time of the year while the situation in Asia remains unclear.
Chinese tanners have not been seeking European hides. Whether this is due a lack of leather demand or whether hides from other places are just cheaper is unclear. It is certainly true that quite a bit of production has been shifting from China to other destinations and this is also reflected by the purchasing and production activity in South East Asia, Europe and Central America.
The peak of production in China might indeed be behind, but this does not mean that China is not going to remain the biggest global leather producer. However, the structure is changing.
The demand from the upholstery tanners in China has been shrinking this season. There's not much time left to place any significant orders for the retail season of upholstery furniture.
There is still good news coming from the automotive segment, despite all the negative vibrations seen in the past six months it is performing well and we expect a strong final quarter of 2017. Even the shockwaves which had been sent through the trade due to the financial problems of GST did not affect the premium section the way many people thought it would.
It might be fair to say the main market and price problems are pretty much related to the changes in the Chinese industry, where the production bubble we were all aware of continues to deflate.
As far as business is concerned, it has once again been a quiet week. The customer base outside China has been performing normally. Certain price reductions in sympathy with the global market trend had to be made, with the only exception of the top end of the market. All other categories had to deal with declines between 2% and 5%, mainly so the spread between global prices did not become too big.
China was quiet once again. There was a flurry of enquiries mid-week, but the bids were far too low and the tanners were not willing to reconsider their positions.
The abattoir prices still fail to reflect the market realities and some players seem to consider politics more important than business.
The kill: Weather conditions have once again led to unusually high temperatures. This is also reflected in a low kill for this time of the year.
What we expect: Our market still fails to find a solid ground for all hide types and the spread between markets and hide types continues to be too wide. This makes the conditions dangerous and most agree that the outlook into the coming months remains negative.
