What happened this week: The market is getting stuck despite the ongoing strong performance of the US hide market. There are only two markets at present supporting the market performance. One is the persistent strong demand from China and the second is a certain need for replenishment of premium selections in the automotive industry.

As far as the Chinese market is concerned, it is a very difficult and complex situation to analyse at the moment. The key question is whether all the quantities sold and shipped recently are covered by leather orders or whether a fair proportion has been bought based on speculation that leather orders will increase later in the summer. It is pretty unlikely tanners already have these orders in hand.

Our discussions with regular clients have not really offered a great deal of insight. While some are admitting that leather business is a fraction better, many others are not confirming any increase in leather orders and are simply talking about the possibility, and expectations, that leather orders will be better starting from July. After filtering most of the feedback we got this week, we are left with the opinion that tanners are disposing with indications for an increase in leather orders later in the summer and most of them have been converting this into courage in terms of replenishing raw material stocks at the still relatively low prices. 

As far as information about physical stocks goes there seem to be some significant differences in different regions. While some areas are already reporting remarkable levels of inventory in raw and wet blue, others are either converting into crust and keeping their productions running or are the latecomers whose hides are on the boats now or are ready for shipment. Everybody is confirming, however, that the volume of raw material in stock, shipped or under contract is not reflecting the present leather business and a substantial increase in production and sales will be needed to cover the present raw material position for tanners in China.

In Europe, the market is still being driven by the activity of the automotive tanners who are trying to secure material to cover their production needs into the third quarter. They have finally accepted that their problems will not keep raw material prices low. New buyers have absorbed overhanging quantities and have been forced to step in to safeguard their supply sources. This has set the abattoir market on fire and the majority of players believe that the bad times are already behind us.

With most markets still buying from the top of the quality scale, the better material hides are showing decent sign of firmness and this is necessary if all the buyers who have been buying in recent weeks follow the market when prices reach new and higher asking levels into the summer. Another victim of the situation came with news of a failed tannery in Austria and one can’t be sure whether or not more will follow. Prices have been barely steady on cows but made moderate progress on males.

The kill: The kill is just about to steady and with a holiday in the south on Thursday and the start of the holiday season we don’t expect much for the next few weeks. Weights are still at their annual lows.

What we expect: In the next week we will see tanners’ responses to higher asking levels, mainly for males. Either they will take them or they will move to the next level down in the product line to protect against higher raw material prices. We remain cautious.

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