What happened this week: It seems the market is taking at least a temporary breather. There is only one possible exception: heavy and good quality male hides. Our concern last week that even the endless Chinese appetite could be saturated at certain price levels was possibly justified. After weeks and weeks of optimistic stories in the media about the recovery of the economy we saw a more realistic view of the situation during the last week and realities are turning back.

The hype about commodity prices, which was considered to be an indication of the economic recovery, has been shown to be more about speculation and strategy (China) than a real sign of economic recovery. Only a handful of countries, led by China, can really generate economic growth at present and even this growth has to be viewed with caution as it is mainly based on major government intervention.

People are slowly realising that a ‘think positive’ policy might be helpful in overcoming current difficulties, but that they should not bury the real and fundamental problems that are still very much alive around the globe. Presently, most of the positive news depends on economic confidence in China, which is coupled with intense purchasing of raw materials and investor confidence that demand will persist until the rest of the global economy recovers and the world can continue on from where it was interrupted in September 2008. In normal day-to-day business it is quite difficult to see this happening in the foreseeable future and, at least for the western world, there will be many difficult obstacles along the way.

Activity slowed down during the trading week. This was mainly because people were unwilling to pay the price for material offered and wanted to buy material that was unavailable. Interest for cows at higher prices faded quickly and, with the recent rise in abattoir prices and the weak US$, steady prices cannot be handled. There is still sufficient interest for males, but having more money is not enabling people to buy more hides at the moment. If people follow ‘a best price sells’, it might still be possible to find some attractive opportunities, but supplying the regular customer base is not leaving many hides to test the best of the market levels.

However, the price levels obtainable in Asia are still far higher than the levels European tanners are willing to spend. This isn’t making the decisions any easier at the moment.

Consequently, trading was much less active this week than in recent weeks. Interest came from all over the place, but the majority continues to be from the Orient. European interest was mainly focused on male hides and some bits and pieces in lightweight material. For cows, ideas between buyers and us were too far apart in most cases, so only a few trades were concluded, and this was after tough and long negotiations. Most pundits from China are reporting that cow tanners’ raw material stocks are well filled and considering the number of hides still waiting for shipment it looks like buyers are reluctant to pay even higher prices after the recent increases.  

The kill: The kill is slowly falling with the holiday season starting. Numbers are in decline and for the next six to eight weeks they will remain at seasonally low levels. 

What we expect: In Europe the holiday period is fast approaching. Apart from a few production gaps or short-term needs, we cannot expect to see much business from this part of the world, except among those who want to position themselves ready for September. We will have to wait to see what happens in the currency market and how much appetite there is for more raw materials in Asia. Let’s hope that letters of credit for the more expensive contracts arrive as quickly as the cheaper ones. There are few arguments to suggest the market will move.

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