German Perspective - 14.11.17
What happened this week: Groundhog Day! We haven’t seen periods like the last six months for decades, which is neither entirely good nor entirely bad. Prices are continuously under pressure except the ones for the specialties, and each week is a repetition of the last.
This makes it difficult to write reasonable reports, because there appears to be no trigger that could catapult us into a new market cycle. The leather market has its bright and dark spots. Global leather demand for many items and tanning capacity in China are on the decline and this is hitting sales. Week by week the ‘inner circle’ of the successful leather industry continue in the outside lane. Many of the others are seeing their engines stutter and some have already stopped on the hard shoulder.
Every trick has been used to try to stimulate business, but so far most has failed. The final one would be the rising price of oil, which might make leather competitive. However, this could only come into play in future seasons, certainly not immediately.
For the moment it seems that the decline of prices has slowed and some are even beginning to believe that we have bottomed and are ready for a turnaround. In our opinion this is a bit premature. We are profiting from the seasonal rise in leather production and in the case of Europeans we have to be happy about the success the automotive manufacturers. They are setting one sales record after the other and with the type of cars which are selling we have to assume that this is also part of the success of hides suitable for this market.
Successful tanners in the specialty and high-quality leather segments are cleaning up another good portion of the production and so it is mainly the grades that find their traditional homes in the commodity leather tanning section that are feeling the pinch. There is a wide spread between the desired products and the neglected material.
Business this week was once again a reflection of the above. Being an optimist, one had to be happy to see a few more bids and enquiries from China. However, at least in our case, we had to end the week leaving trades open due to a gap of an average $2 between our ideas and the prices customers were willing to pay. The good news is they started bidding $5 below this, and so were getting closer.
In Europe, leather business continues to be reasonable and maybe even good for the season. Hides are needed, tanners buy, hides are shipped and so far, paid for. Prices were once again fractionally lower, but this were more political concessions of the sellers than a real weakness.
The kill: The kill and weights remain normal for the season and the sharp weather change might push numbers higher in the weeks to come.
What we expect: It seems price pressure is taking a break. Nothing has changed, but at least in Europe most programmes have been finalised until the end of the year. That doesn’t leave much room for big changes in the short term.
