German Perspective - 16.1.18
16/01/2018
In Europe, all have returned to their desks and machines. Not much has changed, except in the currency market where the US dollar continues its slide and we have reached a decline of 15 cents, or more than 10%, since January 2017. The value of European hides has been hit by that number on a yearly basis, independent of price declines.
If one looks at the declines of the dollar-based supply origins it is obvious how much pressure has built on prices in Europe. This impacts raw material immediately while the effect on the finished leather market always comes with a time lag.
This might be reasonable if the players who continue to argue declining slaughter in the first quarter take this into account. It cannot be generalised, because the tanners depending on fresh, chilled hides of a certain quality and have their customer base in Europe are less flexible, but sooner or later the global decline of leather value is going to reach them as well. Nobody knows when, but their buyers recognise the trends and it is popular to push hard on leather prices with or without reason.
Market activity this week was somewhat better than last week, even since the beginning of December. The weak market trend and abundant global supply brought tanners to the conclusion that it would be risk free to postpone additional coverage until January and so we saw enquiries from all over the place and for all kind of hide types.
While this sounds positive, it was not so easy. Quality requirements are strict and not a single tanner was willing to pay asking prices. The largest problem developed overseas. Buyers are picky about which weight ranges they are looking for, they ask for specific confirmations of selections and their prices ideas are down. Combined with the weaker trend of the dollar it was once again almost impossible to find agreements, so it ended in few sales from lots of interest.
In Europe the situation was a little better. The buyers were also stiff on prices, but where a real interest was traced a sale with a small concession on price was possible. However, the number of tanners insisting on fresh hides continues to rise and this is creating a two-tier market: fresh levels and salted ones, which are generally defined by the buyers in Asia and are significantly lower.
All of this would not be such a big problem if abattoir prices were more elastic. The levels at the slaughterhouses are only based on the highest obtainable level for top-graded hides for the exclusive European tanners, while the surplus hides or the ones that need to be salted and marketed internationally play on a totally different stage. This is not reflected at the slaughterhouses and after the correction after the summer, not much has been done. Every month there is a different reason. However, if we look at the global situation we see other markets trying to resist against further declines, but the number of hides on offer and the demand for leather does not match and this will have to be addressed sooner or later, at least in Europe.
The kill: The kill is returning to normal seasonal levels. The big seasonal slaughter is behind us and so we should now continue to see numbers steady until after the carnival week in February.
What we expect: We are now heading quickly towards the Chinese New Year break. This might not have a great effect, because the plans have already been made, but it seems that this year buyers in China have no reason to interrupt their vacation by hide purchases. There seems also little speculative mood and Asian buyers are traditionally not the most active ones when a market is not showing strength. Consequently, currency and the fundamental problems we stated above will dominate.
Share this story:
