Extracts from the Hidenet World Report22 April 2016
The global leather market examined.
Slaughter continued at low levels. Prices in general were steady with the previous weeks.
Meat-processing giant JBS Australia has moved to quash rumours that its Townsville plant will not open this season, saying it has invested close to $3 million in the abattoir in recent weeks. JBS’s chief operating officer Northern, Anthony Pratt, said there was no truth in talk that the Stuart plant would be mothballed.
"The plant will open on 30 March as we’ve previously announced and all 580 workers will be back at work," Pratt said. "Unless there’s a cyclone or some other unforeseen event, we will be open on that date."
The Townsville plant has been closed since 25 November 2015, making this the longest end-of-year closure in about 15 years.
The extended shutdown has created angst among producers with cattle to sell and meatworkers waiting to return to work. It has also triggered a meatworkers’ union campaign against the live export industry, which the union sees as a threat to local jobs.
Fresh-green prices rose recently and, as a result, tanners have now raised their prices between $1.25 and $1.28 CFR on full substance best-quality 22/24kg. Slaughter has fallen and JBS announced it was closing five of its slaughterhouses for 20 days as a result.
Whole hide drop splits were offered on 26lb and up at $62 per pound. In China, splits from various origins were priced at 4,700–4,800 yuan a ton for splits suitable for high-end suede and 4,000–4,100 yuan a ton for PU.
Sofa-grade splits were priced at 3,200–3,300 yuan a ton and 2,300–2,500 yuan a ton for medium grade.
Medium to low-grade splits suitable for suede were at 1,700–2,000 yuan a ton and 1,100–1,200 yuan a ton for gelatin.
Low-end PU leather was priced at 1,000–2,000 yuan a ton and 800–1,000 yuan a ton for industrial gelatine.
Excluding the planned production base on fresh hides with immediate delivery, the bull market reserved a few novelties. Prices did not move and attempts to increase were rejected for the penalisation of the split trade.
Values for Southern benchmark hides for the automotive business were at €2.15–2.18/kg, while the northern German and Belgian/Dutch hides were at €1.80–1.85/kg.
India’s Council for Leather Exports (CLE) said, in a press release, that the fair in Chennai from 31 January to 3 February had 637 buyers from outside India. The organisation said that equals a 70% increase over the previous year. International buyers came from 66 different countries and the total attendance was 12,556. The fair had 456 exhibitors, of which 156 were from outside India
Wet-blue goatskins averaged 60/65ft2 a dozen selection 20/40/40% TR/IV/V $35 a dozen C&F.
Wet-salted Kenya Hides averaged 13/15kg a hide 80/20% I/II $1.05/kg.
Wet-blue unsplit whole hides, 18ft2+ averaged 24/28ft2 20/40/40% I/II/III $0.65/ft2 C&F.
Wet-blue unsplit whole hides, 28ft2 averaged 30/33ft2 20/40/40% I/II/III $0.75/ft2 C&F.
Dry-salted Madagascar hides were 9/11kg a hide 70/30% I/II $1.15/kg C&F.
Wet-salted Madagascar hides were 14/16kg a hide 70/20/10% I/II/III $0.75/kg C&F.
Paraguay full substance wet-blue TR I sold steady in and around $1.15/ft2. Lower grades eased. Sources say demand from traditional markets like Italy and China have displayed less than normal interest, but sellers, as always, are hopeful that business may turn around in Hong Kong at the month’s end.
The continued export of raw hides and skins from Rwanda has slowed the development of the leather sub-sector, which analysts say has the potential to generate $130 million annually. The latest data indicates that the most the country earned from exporting raw hides and skins was $12 million in 2014.
"Currently, the production of hides and skins is growing but almost all is exported raw to Uganda, Kenya and China," said Rwanda Minister for Trade and Industry Francois Kanimba. Already, Kigali Leather, which has started producing wet-blue hides and skins, is complaining that it does not get enough raw materials and has asked the government to ring-fence the local leather market.
The Rwandan hides and skins dealers say they find in the regional market in Democratic Republic of Congo, Uganda and Kenya are competitively priced, partly because of the developed tanneries in those countries. In Uganda, the sub-sector has the potential to inject $5 billion into the economy yearly.
Dry-salted goatskins averaged 1.0/1.5kg 4/7ft2 averaging about 5.0/5.5ft2 selection 80/20% I/II $2.00/skin C&F.
Dry-salted sheepskins averaged 2.0/2.50kg 4.5/8.0ft2 averaging about 6.0/6.5ft2 selection 80/20% I/II $3.25/skin C&F.
Wet-salted Senegal hides averaged 13/15kg a hide 70/20/10% I/II/III $0.70/kg C&F.
A press release recently announced South Korea-based Simone, a global-leading original design manufacturer (ODM) of world-renowned luxury handbags, joined forces with local private equity firm MBK Partners to acquire US-based GST AutoLeather, the world’s largest leather-car-seat-maker. According to the investment banking industry, in cooperation with MBK Partners, Simone Investment Managers, an investment subsidiary of the handbag ODM, signed a memorandum of understanding (MOU) with Japanese private equity firm Advantage Partners, which holds a 100% stake in GST AutoLeather, to acquire the full stake at about $400 million. The Korean investors is said to be in the final stages of due diligence for the buyout.
Established in 1933, the US leather car-seat-maker ranks first in the global leather car-seat market. The company supplies its products to global automakers including Toyota Motor Corp, Honda Motor, General Motors, Chrysler and Volkswagen. The company established a joint venture in India with Tata Motors in 2014, and it has foreign branches in Mexico, Germany, Hungary, South Africa, China, Japan and Korea.
Simone is the world’s top ODM of high-end handbags including DKNY and Michael Kors, and the company has recently launched its original handbag brand 0914. Chairman Kenny Park is said to have decided to buy the leather car-seat company in hopes of strengthening the company’s foothold as an original leather master and enhancing the company’s brand.
Simone Investment Managers is the Korean handbag ODM’s investment arm, which mainly manages the personal assets of the chairman. Previously, the asset manager had made investments in real estate such as the Washington Harbour Building and the headquarters of Weatherford.
With the acquisition, Simone Investment is expected to spearhead mergers and acquisitions to expand the business. Simone, which has been posting a net profit of about $109 million every year, is expected to funnel enough M&A funds for its investment arm.
In the latest takeover deal, MBK Partners will likely provide financing for Simone Investment Managers. The Japanese branch of MBK Partners will take charge as the seller is based in Japan.
Dry-salted hides averaged 7/9kg a hide 70/20/10% I/II/III $1.15/kg C&F.
Wet-salted Tanzania hides were 10/14kg a hide 70/20/ 10% I/II/III $0.65/kg C&F.
Prices and currency are unchanged. There’s a good demand for British and Irish hides in Arzignano, because these materials are adapted to be processed for medium/high-quality automotive and furniture. There were, recently, some good contracts, but without reaching the peaks of late 2014. Sellers tried to ask for a few pennies more but they need to sell in Europe, as these hides are no longer absorbed by China, and they finally accepted the stable counteroffer.
Uruguayan slaughter fell 10% recently before totalling 40,042 head. So far in 2016, total slaughter is 2% below the same timeframe in 2015. Fresh frigorifico hides are trading at about $0.90/kg, steady when compared with the past several weeks.
Steer prices advanced 3% and more depending on the type of hide. Heavy Texas steers, the country’s most prodigious selection traded at $71–73 C&F by mid-March compared with $67–70 a month ago.
Branded steers, the next most populous selection, moved up from $61 C&F in late February to $68 and $69 C&F. At the same time, heavy native steer prices went from $76–78 to $80–81 C&F. Butt-branded steers rose in a similar manner. The only laggard was plump branded cows. 52/54lb averages that traded in and around $40–$42 C&F in the last report, had trouble finding buyers at this level in March, and observers expect lower prices to be seen by the time of MM&T in Hong Kong
Steer prices and branded steers were firm in Texas. Seasonal average wet-blue Texas sold recently at $85.00 C&F.
Butt-branded and heavy native steers advanced $1. The cow sector had difficulty in finding bids among an atmosphere of softness.
Market factors and Mother Nature aligned for fast-pace expansion for US cattle producers over the past two years. Total cattle inventory increased 3% from 1 January 2015 to 1 January 2016.
Recently, John Hochstein, manager of Cargill’s hide division, announced his retirement. In a press release, Hochstein said that, "After 29 years, I have decided to retire from Cargill. I will remain working with Cargill through the fall of 2016. I want to thank all my friends and business partners for their support over the 22 years I have spent in the hide business and 29 years with Cargill."
While John will be managing the hide division of Cargill for many more months, he will be missed by those with whom he traded each week. He is presently the Chairman of USHSLA and a leader in the industry. ?