Details as follows:
Reflections
on The Week
European
Hide Market Lurches Into The New Year
The
New Year in Europe began on a stable-to-firm tone despite the fact that nothing
appreciably improved for most tanners around the continent. However, export
activity was available to those with decent channels in China and surrounding
Asian countries. Prices appeared generally slightly better than they were
before the year end holidays with few exceptions.
The
stronger U.S. dollar made calculations very interesting for those selling hides
to China this week. This was particularly true given that a firming North American
market helped to increase the level in dollar-based terms. So the returns in
euros to European exporters was that much better. Chinese tanners continued to
actively pursue hides of many origins prior to departing on their Lunar New
Year. Most of the Chinese are said to be shutting down operations toward the
end of next week.
Meanwhile,
the struggle of the Italian upholstery tanners continued this week. There were
reports of a couple of tanners who never reopened after the New Year and rumors
of others who are in deep financial difficulties. Bank lending for many is
quite tight which further constricts leather makers in their efforts to create
turnover. Many North Italian tanners are operating hand-to-mouth and are forced
to buy immediately upon obtaining leather orders and obliged to pay prevailing
prices in order to effect prompt shipment against these contracts.
Meanwhile,
ANCI, the Italian footwear manufacturer association, gave some encouraging news
regarding shoe production as the final numbers are being tabulated, predicting
that 2011 totals ought to come in showing an increase of over 4% in production
versus 2010 despite a decrease of some 3.4% in domestic consumption. This news
is considered an indication that the local shoe industry rebounded from the
recession of 2008-2009.
With
lighter kills in several important cattle producing countries, Germany among
them, this has combined with good export sales in order to comfortably extend
forward sold positions of many hide producers and sellers across Europe. There
has been and good (and presumably successful) effort to get ahead of hide
production in anticipation of the Chinese Lunar New Year. As such the popular
opinion is that, while sales activity may slow down after next week, the hide
market is likely going to be able to withstand the relative absence of Chinese
demand.
Next
week ought to see fully firm-to-rising producer asking levels opposite moderate
follow up among their customers.
Upcoming
European Trade Show Events
|
Riva
Schuh
|
Riva
del Garda, Italy
|
Jan.
14-17, 2012
|
|
IDF
|
Istanbul,
Turkey
|
Jan.
19, 2012
|
|
Le
Cuir
|
Paris,
France
|
Feb.
14-16, 2012
|
|
Micam
|
Milan,
Italy
|
Mar.
4-7, 2012
|
|
GDS
|
Dusseldorf,
Germany
|
Mar.
14-16, 2012
|
|
*FIMEC
|
Novo
Ham., Brazil
|
Mar.
20-23, 2012
|
|
Lineapelle
|
Bologna,
Italy
|
Apr.
2-4, 2012
|
|
*ACLE
|
Shanghai,
China
|
Sept.
4-6, 2012
|
|
GDS
|
Dusseldorf,
Germany
|
Sept.
5-7, 2012
|
|
Le
Cuir
|
Paris,
France
|
Sept.
19-21, 2012
|
|
Lineapelle
|
Bologna,
Italy
|
Oct.
10-12, 2012
|
*
Important global event
This
Week's Currency Corner: U.S. Dollar, Euro And Pound
|
|
USD-EUR
|
EUR-GBP
|
USD-GBP
|
|
Friday,
Jan. 6
|
1.276
|
1.211
|
1.545
|
|
Monday,
Jan. 9
|
1.273
|
1.213
|
1.544
|
|
Tuesday,
Jan. 10
|
1.279
|
1.209
|
1.547
|
|
Wednesday,
Jan. 11
|
1.271
|
1.208
|
1.536
|
|
Thursday,Jan.
12
|
1.277
|
1.201
|
1.533
|
Industry
News Bullets
Germany- Rolls Royce Rolls
To Record
2011 was a record year for
BMW Group’s Rolls Royce which managed to sell 3,538 units. The biggest gain was
in the Asia Pacific which increased in sales by 47%.
EU- Vietnamese Shoe Exports
Growing, Except In EU
Lefaso announced that the
industry’s footwear export value in 2011 grew an estimated 25% to $7.5 billion
but traditional market EU did not highlight the gains. EU Anti-dumping
monitoring is to continue through March of this year.
Scotland- Ford Motor Joins
With Bridge Of Weir
Ford Motor Company is using
Bridge of Weir leather in several Lincoln models and promoting the green
advantages in its advertising. Ford first used Bridge of Weir leather back in
1911 for its Model T cars.
Germany- VW Marketing
Aggressively In U.S.
With the EU economy foundering
and car sales stronger now in the United States, VW revamped several models
last year which it is marketing aggressively there. Other foreign auto
companies are taking a similar approach.
Italy- Fire At Solofra
Tannery
A fire broke out on January 5
at the RAN Pel Tannery in Solofra, Italy. The midday incident was apparently
caused by a malfunctioning machine which took fire fighters two hours to extinguish.
Italy- ANCI “2011 Shoe
Output Value Greater Than In 2010”
Italian footwear manufacturer
association, ANCI, estimated that the final production figures for shoe output
value in 2011 should come in at 4.2% more than in 2010. Estimates for the year
predict a total of more than EUR 7 billion worth of shoes.
Raw
Hide Markets Across Europe
UK/Irish
Ox/Heifers: Dollar, Export Business Bolstering Market
UK
and Irish Ox/heifer Report
As
indicated at the top of our report, the U.S. dollar, having improved by 6.5%
during the last 2 months against the euro (about 4% versus the British pound)
has helped dollar-based bids in China on UK and Irish ox/heifer selections. The
North American market has increased $2.00-$3.00 to China since the New Year.
While
we have heard of UK and Irish asking prices on 36 and ups surpassing $80.00
CNF, the top tanner interest we heard this week was $78.00 CNF on UK 36’s which
is $1.00 to $1.50 better than what had been seen at the end of 2011. We know of
at least one exporter who passed on this business while admitting in the same
breath that this was pretty good money. Irish interest was logically lower with
only scattered interest at $75.00 and the outcome doubtful at this price as of
press time.
The
market in Italy was decidedly more quiet. Offerings of Irish 36 and ups were
seen in the range of EUR 1.35-1.37 but bids were hard to come by. The best
indication we heard was EUR 1.30 but rejected by the supplier.
Abattoir
prices were said to be relatively stable but unsettled in the UK with a spread
of between GBP 38 and 41 at origin. The Irish abattoir price was quoted at EUR
42, according to a source.
Forecast:
From what we
could tell, the ox/heifer market on the Isles is adequately sold ahead with
indications that the supply side of the equation will be prepared to pick and
chose between bids on lower volume while the Chinese go away at the end of next
week. In the meantime there could be better money paid during the next few
days.
European
Cow Hides: Steady-To-Firm
Female
Hides Report
Click on chart to view underlying data.
The
tone of the cow market was generally deemed ‘clean’ by most in this particular
niche of the trade. Good containerized export demand, mainly in China, combined
with scattered European tanner business to boost sales and, in some cases,
price. Slaughter levels were also somewhat diminished in key supply regions
across the continent.
The
European market was also helped buy a firming trend in North America. Supplies
of various female bovine selections in the U.S. and Canada have left a void in
the supply base for Asian tanners who actively pursued offerings of European
hides as a result. Therefore, even though Italian interest was narrow, those
needing to buy had to step up to the proverbial ‘plate’ to buy and pay fully
firm prices.
Benchmark
North German 25 and up cows improved a bit this week with sales recorded at
anywhere from EUR 1.25 to a high of EUR 1.35, depending on exact specifications
and payment terms NIT. There was a high asking price by one producer of as much
as 1.40 by the end of trading today. As far as we know this will also be the
ask next week as no customers were willing to stretch this high for extended
shipping terms. South German cows were said to be about 10 cents higher than
their North German counterparts.
French
producers boasted of selling at EUR 1.30 an 32 and up cows to both the
Arzignano and the Santa Croce markets, subsequently increasing their asking
prices to 1.35 and 1.40 for new business. As of today there were no takers at
the higher basis. A small quantity of 32 and down cows brought EUR 1.40 this
week as well. All prices were delivered North Italy.
Even
though supplies remained tight in South America, we heard that the level
dropped on certain suppliers of Brazilian wet blue material. Evidently $1.40
asked by suppliers drew $1.30 bids by tanners who claimed this price was
possible. We had no confirmations, however, at this level.
Forecast:
While we cannot
get overly excited about the cow market in view of the ongoing difficulties in
the Italian upholstery sector, we have to be impressed by Chinese demand which
is providing a volume outlet for European cow hide suppliers. As such we have
to expect levels to easily maintain their levels, at least in the days ahead.
Veal
Skins: China Holds The Key
If
you spoke to anyone in Italy this week, you would say that the veal skin market
must be in free fall. Simply put the Italians are not pursuing skins to fuel a
business they do not enjoy at the moment. This is nothing new, but the strain
of their lack of business has been building over time and is impacting the
overall price structure of veal skins around the continent.
So,
where does one offload his skins these days? While there is still some select
business to do in France and to a limited extent the Netherlands, the bigger
volume business available at the moment is in China where sellers are investing
their efforts more and more over time. India has been unreliable and yet cannot
be ignored, but the Chinese possess enough appetite to consume what is produced,
even if they also possess a reputation as price buyers, too.
This
week saw a continuation of the recent trend of gradual declines. French
producers admit that most selections were difficult to move. Anything 13 kilos
and down even appears unsalable at any price(!) The French 13+ black and white
market softened incrementally and was pegged this morning at around EUR
4.60-4.65, down about 20 cents from where it was just before Christmas. Even
French luxury skins have declined over time. Depending on exact specifications
the quotes we heard were between EUR 5.50 and 5.75 delivered.
The
Dutch market was more difficult to discern as key participants were in Asia
marketing their skins this week and were unavailable for comment. However,
according to others in Europe, there is a considerable range of price ideas for
the value of a 16.50 kilo Dutch veal skin. Optimists feel that the market is
EUR 3.80-3.90 while pessimists feel the market is as much as 20 cents below
these indications.
Forecast: Even if sales efforts in China
are successful this week and next, this growing market segment will be going
away for nearly a month from the end of next week and, thereby, putting more
pressure on selling in other markets which are relatively inactive. As such we
have to expect veal skins to drift a bit within the next fortnight or so.
European Bull Market: Holding Steady
Male
Hides Report
Click on chart to view underlying data.
Male
hides continued to hold their own this week as a balance between supply and
demand kept prices in line. There was a firm undertone detected by some who
note that slaughter in Germany and surrounding countries is less than normal.
In that same context the German abattoir prices were up considerably for this
month. According to various reports the increase was anywhere from EUR 3.00 to
EUR 5.00 per piece.
In
the hide sales department, sales were made on South German 40 and ups at
between EUR 1.65 and 1.70, although the latter price was doubted by other
correspondents we spoke to today. These levels are up about 5 cents from those
registered just before the holidays. North German 40-49 kilo averages were said
to be concluded at 1.50 with further offerings at 1.55 being ignored late in
the week.
In
fact we heard that certain auto seat cover makers were dishing out bids at
lower money in hopes of finding weak links in the supply chain. From what we
could gather they didn’t find any. French suppliers managed to sell their
better quality 42 and ups at fully EUR 1.70 delivered in one case and 1.65 for
‘normal quality’ in another case.
Dutch
heavy bulls were reported at 1.50 NIT in an isolated trade.
Forecast:
Some
people forecast car business in Europe to slow down in the not too distant
future based on the poor economic outlook for the common European citizen
which, in turn, would have a negative impact on the bull hide market. While we
generally go along with this possibility we also believe that any decline in
auto business will take months before it filters into the raw hide market. With
low kills and higher abattoir prices in Germany today, we have to expect a firm
bull market based on tight immediate supply and reasonable short term demand,
not only from the auto segment but also for other high quality goods.
Commentary
Looking
Ahead: New Years Revolutions
I
love to watch the end-of-the-year television shows which give a condensed
version of the most important news events over the past 12 months. They are
usually packaged in different segments such as sporting events or political
events or important people who died during the year. It’s kind of a tonic for
me as I put away the old year and contemplate the year to come. In fact I do
the same thing with the last European Hidenet Report of the year, recapping the
highs and lows which transpired in the year just completed.
So,
it begs the question: What can we expect to happen in the hide and leather
market in 2012? With all of the precariousness of the debt crisis in Europe, it
would be easy to predict doom and gloom equating to much lower prices. The U.S.
situation isn’t much better. Adding to it the American presidential election
taking most of the year keeps any direction of new leadership in considerable
question, too. Then there is China where growth continues but the rate of
growth is slowing down.
We
could assume that Chinese and other growth models in Asia (such as in India,
for example) will compensate to some degree the difficult situation in the EU
and North America. How much no one seems to know. Without attaching specific
numbers to a prediction, we could assume that raw materials for leather making
safely ought to trade by the end of the year on a lower basis than they did in
2011.
What
other industry trends can we anticipate in 2012? Don Ohsman, Hidenet Publisher,
wrote in the latest U.S. Weekly Report about a few things which are unfolding
west of the Atlantic Ocean. For example, one of the major U.S. packers is
beginning to bag hides instead of palletizing them to take advantage of cost
and time efficiencies. Another big packer is planning to substantially increase
its percentage of hide production into wet blue before selling to the public.
These concepts appear to have potential to spread as trends.
Another
relatively new initiative seems to be gaining traction in the industry as well.
It has to do with creating black lists which name trade members who don’t
perform on their commitments for hides or leather. This was actually born from
the hide crash of 2008 where many high-priced contracts were not honored by
tanners, mainly in (but not limited to) Asia. However, when the market
rebounded sharply some time thereafter, a number of suppliers decided to play
the same game in return.
Happily,
in a spirit of cooperation between the CLIA (Chinese leather group) and the
USHSLA (the U.S. hide and leather group) they agreed to poll their respective
members in an effort to create lists of suppliers and customers who habitually
have not performed on contracts during the last couple of serious market
gyrations dating back to 2008. Although these black lists are not going to be
published, members of the two associations will have access to the names of
those who do not honor their commitments when the market goes the ‘wrong’ way.
This
idea isn’t new. People talk about it every time there are extreme bull or bear
markets which compel certain companies to renege on their agreements. However,
in the end, as markets calm down, its members do, too, and any official list
has not been published to my knowledge until now.
With
the market drop of the last several months, the number of reports we are
getting from European hide suppliers about bad contractual behavior is
increasing again. In fact there have been some who are reported to have reneged
on contracts which were only a few dollars from the current market. Is it time
that that organizations such as Cotance or ISHALTA get involved? I am not sure
but I predict that this concept of industry black lists will be a growing trend
of self policing among trade groups as the industry strives for greater
integrity.
Craig
Roalson (editor)
Hidenet.com
A
Reminder to our Readers
All
the price charts we print are intended to be used solely for a basis of helping
illustrate trends in the market. The actual prices seen in them do not reflect
qualitative variation from one origin to another. Hidenet.com recognizes that
there is a variety of factors which determines different prices for similarly
described merchandise.
