German Perspective - 20.8.19
20/08/2019
All in all it was one of the best sales weeks in a long time. After such a week in the middle of August it was necessary to sit down and to review the facts. Before claiming this to be the bottom and/or the turnaround of the market it might be wise to check before celebrating. The interest was for specific qualities, specialties and a bit of replenishment in the automotive industry. This is reflecting what we already know: specialty and quality leather is not part of the drama.
The second quarter is traditionally the slowest and with the lasting bear market every tanner, including the successful ones, was trying to reduce stocks, to average down raw material cost and to check how long this may last. At least this section of the tanning industry seems to have concluded that waiting for additional price reductions might be too greedy.
And indeed there are small segments of the leather industry that are performing exceptionally well. While at the lower end there is a surplus of stocks, this isn’t the case for the high-quality end and specialist sectors.
Interest in Europe was limited but slightly more plentiful from Asia, where they don't have such niche markets and high-end productions. However, they are also trying to get the best for their money. This means that we have not seen much interest for any of the low grades for commodity items, but people are willing to pay full asking prices for the 'best-value-for-money' items.
One had to be happy with the number of sales, but it is not enough to clear the entire stock. We are moving towards an interesting time when we should learn if the traditional uptick in leather demand after the summer holidays will spill into the demand for the full range of raw material. Realistically, it doesn't seem likely that the lower end will benefit. Sales were mostly done for better-quality cows, heifers and premium bulls.
The kill: With the end of the school holidays in the northern parts of the country, the kill begins slowly to pick up. The others will return in the coming weeks and the bulk of the southern regions in early September. So, no big changes can be expected until then.
What we expect: One should have expected global political factors would bring business to a standstill this week. This didn't happen and now we are eager to learn if this is going to continue. It seems safe to say that quality and special leathers continue to be stable while the standard materials continue to suffer. The result of this market cocktail remains unknown.
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