What happened this week: The raw material and leather industry is now finally preparing for the fair season. From the All China Leather Exhibition in Shanghai to Lineapelle in Bologna in mid-October, a number of shows of all kinds related to the leather industry will take place around the globe. For all kinds of leather products including upholstery, leather, leathergoods and shoes, the new trends and directions for the next production and retail seasons will be set.

The main focus at the moment is the Shanghai show, which runs September 1-3. After the long summer break it is not only the first get-together of the trade, it is also an indicator about the general mood around the globe. With visitors coming from all over the world it is a very international event and allows people to meet and speak to familiar faces in order to get an impression of how things will develop for the rest of the year.

The week before the show was pretty quiet as far as trading was concerned. It seems that the entire world is now waiting for the fair and is expecting all the information and meetings to reveal where the trends of the market will go. In the meantime one gets the impression that if there are any sales taking place, they are lower than the levels seen before. Although hardly anything is really being published, one gets the impression that selling today means a discount on the asking price in most cases.

Reports from people who are already travelling in China are almost the same. The well-established tanneries are not complaining about order books, but they can't afford to pay the actual raw material prices. While in spring they were still scared about getting the required raw materials in the volume they needed, the situation is now different and most people are convinced that prices will slide into the autumn.

Nobody is predicting any sharper correction, and no one is really interested in one, but a slide over the next four to six weeks is what many are predicting and expecting. Consequently, they are not rushing to purchase and are bidding the market moderately lower.

The supply side is a bit two-fold. On one side you have those who are expecting a strong performance from the market for the rest of the year, so they are just leaning back and turning bids down. On the other side you have those who have become a little bit sceptical about economic developments and have decided to take a reasonable interest in smaller volumes. Since not much inventory has been built over the summer there is still no exceptional pressure and the market balance is not yet seriously damaged.

Apart from the simple questions over supply and demand, the behaviour of some overseas clients is deteriorating. There are more and more stories about slower payments and letters of credit and there are also stories about containers getting stuck in some of the Chinese ports.

These containers might even have been paid for, but there seem to be other reasons as to why clearance is taking so much longer than usual. Part of it might be related to various government controls. Everything from tax and veterinary issues to pollution is being mentioned and there are also a number of bigger disputes about quality and origins. In the case of shipments from Europe we are not surprised as many arrivals are still related to shipments from the time when the market was 'hot' and a number of shippers were taking risks and ‘bending’ descriptions and qualities.

With prices not having risen for some time and leather business not justifying the prices paid, buyers have become pretty sensible and aren’t hesitating when it comes to leaving material in the ports or walking away from contracts from underperforming shippers. Prices for the few hides sold were barely steady, and the few hides sold were hardly worth a reference. However, we get the impression in Europe that sales for the majority of grades need to be promoted by the introduction of small price concessions.  

The kill: The kill was slightly lower again. Heavy rainfalls did not support the transportation of cattle and consumption of beef. Anyway, with the holidays now at an end, the kill should start to normalise week by week. 

What we expect: The coming weeks will certainly be decisive after the long summer doldrums. The show in China and the return of the main tanning centres in Europe will finally allow for a better judgement of production and demand. Anything can happen, but there are definitely fewer indications for demand levels that would allow sellers to ask for more money than there is potential for sellers to consider price concessions in order to keep the production constantly sold and moved out of the warehouses.

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