Extracts from the SauerReport: Sep 2013

1 September 2013

As we go into the summer shut-down, the volume of news is now quickly reducing. More of our sources are going on holiday and the players still in the game find the holidays too close and the general situation too unsure to still conclude lots of new business. This mainly involves European sellers, traders and tanners, of course. The America-Asia business will go on as always.

As we go into the summer shut-down, the volume of news is now quickly reducing. More of our sources are going on holiday and the players still in the game find the holidays too close and the general situation too unsure to still conclude lots of new business. This mainly involves European sellers, traders and tanners, of course. The America-Asia business will go on as always.

This report will get shorter by the day until we also arrive at our annual holiday closure (end of July depending on global activity). We can find news and report it but we cannot make it if it is not there!

Europe is now slowly turning into the cemetery it always is in August. Some of the car leather tanners may work on, however, because of the strong demand but apart from that there will be little or nothing to report. Unless something special happens. One never knows.

The very disappointing car sales in Europe may lead to production slow downs in the second half of the year. With some luck, however, the more expensive brands which are the big leather consumers may possibly escape, as recent figures indicate. Those sales are quite good.

We move into the holiday period with firm prices or even higher. Hides are not that many and some countries could easily sell more than they have, especially cows, car leather suitable hides and calfskins.

Italy sticks to its usual origins and selections and has already bought what is needed. Some are still buying for September/October delivery but with no dreams of buying cheaper. China is absent from many European countries since prices are just too high. The exceptions are cows which keep moving.

The UK and Ireland are selling heavy ox/heifers at very steady prices and even higher prices for cows. Scandinavia same story. France has increased its prices but Germany simply cannot get what it needs it seems for its standard hides and one hears only complaints. Car leather hides are another story. They are still the cause that makes all other hides too expensive.

A very low kill in Italy (no money for beef) pushed hide prices higher just before the holiday closures which is quite unusual. Tanners here will start coming back from around September 26.

This year there are no stories of tanners waiting for bargains from sellers who have hides in stock and would like to see them go before the holidays start. There are no stocks and if they would occasionally show up they will be gone before one can say there are some hanging around, traders say.

The national kill in June was 12% down from the same month last year. Or 6.2% on the January/June period.

Per type of animal the calf kill was down 13.3% on a month-to-month basis and 7.8% year-on-year. Ox/heifer/bull slaughter dropped 11% on a month-tomonth basis and 6.8% year-on-year. For cows the drop was 13.6% month-on-month or 3.2% year-on-year.

All prices are up. Very strong demand for calfskins resulted in the highest increases. Some producers say they are sold out till the end January next year.

In Spain skin traders report it is calmer than normal this time of the year. Tanners report they have less orders for the months to come.

Four years of increasing skin prices followed by two years at steady high levels have exhausted the finances of the trade all over. All are tired of this situation but no one is reacting.

It is believed there will be too many skins available in September/October but not enough money around to buy them all. In that case what will happen to prices?

It could all end well if the trade manages to get prices down at the abattoir but if not there must inevitably be victims.

Heavy bull hides in Germany/Europe for the car leather industry continue to rule the raw prices at the abattoirs, at the same time minimising sales chances for all lower qualities to find new owners. Abattoirs sell most hides at telquel (as is) prices.

About a year ago this report wrote about considering the possibility of creating two markets. One for the best car leathers and another one for the rest. Each with his own price at the abattoir. It will probably mean that the car leather hides would become more expensive while the rest could be sold cheaper (car leather tanners don't agree of course). But with two different realistic markets life could become easier for all in the end. Maybe this is the moment to reconsider?

The kill in Germany remains at its lowest seasonal number till end August and probably even into September for South Germany.

German hides are not in favour in Asia. We know of offers for cow hides at prices considerably lower than similar qualities from other European origins but they still do not sell. The reason is unknown to this office.

Other sales prices cannot change because of tough abattoirs who still refuse to talk about reductions.

In Italy sales prices seem in line since a few (very few) sales were reported at prices as in the report.

The presidential elections in Iran have caused big changes in the Iranian industry. As our correspondents says, the moment results were known, the stress situation was gone, everybody kept quiet, no troubles erupted and the local currency, the rial, began to move up and gained 20% against the US$ with expectations to rise further.

This caused a big shock for exports and prices for pickled sheep quickly dropped from US$10-$8 and goatskins dropped from US$4-US$3.

It also encouraged tanners to import wet-blue hides but this door was quickly closed by international sanctions which forbid shipping companies to deliver goods to Iran.

Tanners are obliged to source (low quality) wet-blue hides and splits inside the country (or through unregistered ways from surrounding nations). Activity is now anyway slowing down for the summer holidays.

All are waiting to see what the new president has been able to accomplish when they come back to work later this summer, hoping he has been able to open the doors to Iran again for international trade.

The hide market in Greece is firm due to short supply plus the fact that Serbs and Turks are buying anything available! This combined action/facts made hide prices jump 0.30 €/kg or 15% in two weeks.

The lambskin market to the contrary is weaker and prices are from €0.50 to €1.00 down, depending on region and quality. The pigskin market remains where it was, steady.

In Serbia demand for hides is on the increase and already more than what can be produced. Prices in the slaughterhouses are thus moving upwards but the international market does not allow sales prices to increase as well. Hence margins for traders are dropping.

The situation in Turkey remains unchanged which currently is mostly due to the Ramadan season to be followed by 4-5 days of Eid holidays. Work will resume on August 12.

The better domestic raw hides from Western regions (European section) show unchanged prices but the kill has reduced. Tanners are more and more interested in importing hides because the local availabilities do not seem to suffice.

On the ovine side the doubleface and nappa market remains the same with complaints about expensive skins and inferior qualities due to summer season.

UK and Ireland doubleface lambskins still find their ways to Turkish tanners in moderate volumes.

Australian and South African merino imports have slowed down due to much reduced interest from the tanners because of the current holiday time and lack of orders and cash. It is likely this situation will last till mid August when work resumes.

Trading in domestic hides in Mexico was calm in mid to late July with prices in the Northern parts of the country moving 5 cents higher.

The Chamber of the Tanning Industry reported that the city of Leon (heart of the tanning industry) now processes some 40,000 hides per day. Half of these are for the shoe industry, 47% for the car leather industry and 3% for the rest.

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