German Perspective – 21.05.19
21/05/2019
As a result, we started from a pretty low level situation at the end of the winter half. As grim as the outlook was, the underlying feeling of the majority of the trade was that there must be something to turn this boat around. The facts did not support this, however, and so it was a feeling based purely on emotion. There are still a few scattered players who believe that all will come right one day as long as we just wait. This might be true, but we don’t know when this ‘one day’ will come or what kind of obstacles we will have to avoid before it does.
The second quarter started on the wrong foot and it had already been difficult before the trade war between the US and China took off. The day that President Trump began to share his intentions on twitter was the day the neck of the market was finally broken, in particular in China. Those with a long history of doing business with the Chinese industry and trading partners were not surprised by the consequences.
Tariffs may be bad and have certain negative impacts on business, but they are not the end of the world and they are not stopping what is already in the pipeline. It takes time to reorganise the supply chains and, in the meantime, scheduled productions and shipments continue to take place. There might be some economical damage, but everything is not put on hold.
One can see the classical ostrich reaction in China. It would be fair to say that in the past two weeks ago almost the entire Chinese tanning industry has disappeared. This is at least the case for our business. Agents apologise and deliver the same excuses and explanations; tariffs and the trade war.
There is sufficient inventory and too little demand to allow tanners to buy anything beyond the few bits and pieces that are always around. The big question now is how much local stocks are around to satisfy any kind of immediate need to keep the industry going.
In the case of Europe, the main products have not only seen a massive decline in price, but also in the volumes of shipments. Some hide types may be substituted, but in some cases the general fears of tanners and the falling prices may have also created a low level of disposable material.
Regardless of how bad business is, the winter season will start again by the end of August and demand for leather will increase, with or without tariffs. We have been pretty pessimistic for a long time, but leather demand hasn’t fallen by 50%. The surplus of low quality material has to be absorbed in whatever way possible, but for average and higher quality leather there is still a much better balance between supply and demand.
Overall balance in the leather market has not been achieved, but to copy and paste the drama from the bottom to the rest of the market is definitely wrong as well. However, it is also a mistake to believe that a recovery should be straight away converted into rising prices.
Trading was once again very light last week. It was entirely based on the renewals of European supply chains, which took place at moderately lower prices.
The kill: The seasonal kill is without any surprises in terms of weights or numbers.
What we expect: No changes in the mood and no changes in demand, which will keep things as they are. We hope for replenishment flurries, but cannot trace any chance for a fundamental change in the coming months. The question is if we will see any panic from those who can’t wait until things change.
| Type | Weight range | Avg. green weight | Salted weight | Avg. weight salted | Price per kg green weight | Trend |
| Ox/heifers | 15/24,5 kg | 22,0/23,5 kg | 13/22 kg | 20/21 kg | € 1,60 |
Stable |
| 25/29,5 kg | 27,5/28,5 kg | 22/27 kg | 25/26 kg | € 0,75 | Weakish |
|
|
Dairy cows |
15/24,5 kg |
22,5/23,5 kg |
13/22 kg |
20/21 kg |
€ 0,70 |
Weaker |
|
25/29,5 kg |
27,5/28,5 kg |
22/27 kg |
25/26 kg |
€ 0,55 |
Weaker | |
|
30/+ kg |
33,5/35,5 kg |
27/+ kg |
29/31 kg |
€ 0,50 |
Weaker | |
| Bulls | 25/29,5 kg | 27,5/28,5 kg | 22/ 27 kg | 25/26 kg | € 1,25 |
Pressure |
| 30/39,5 kg | 36,0/37,0 kg | 24/34 kg | 31/33 kg | € 1.30 |
Pressure |
|
| 40/+ kg | 45,0/48,0 kg | 34/+ kg | 38/40 kg | € 1.20 |
Pressure |
|
| Thirds | 15/+ kg | 25,0/27,5 kg | 13/+ kg | 24/26 kg | € 0,30 |
Weakish |
| Thirds bulls | 30/+ kg | 38,0/40,0 kg | 24/+ kg | 33/36 kg | € 0,50 |
Weak |
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