What happened this week: Last week we were expecting something like a correction phase and it seems that we are now right in it. It is usual after a long bull market. Everyone wants cheaper prices, but not a falling market, and in the dreams of everyone involved the market would be steady, but the prices a fair bit lower. This is hard to achieve, in the days of more competition between commercial reports than on the market itself. Buyers and sellers are now playing the traditional games. Sellers are trying to paint the market better than what it really is and buyers are trying to move things their way by disappearing and hiding away. This is reducing trading volume and activity by quite a bit and leaving the market with insufficient trading volume for a real valuation of prices. This leaves the market with isolated conditions rather than a clear trend. The situation for bull hides in Europe remains reasonably stable due to the short supply chain and hardly any buffer stocks in tanners had to walk away from the market for too long. They tried to play it rough and hard this time, but at the end they couldn’t risk interrupting the supply or letting hides move into the hands of the competition. Despite rising concern about the sustainability of the leather demand in the second half of the year, they still have to procure the production until the summer holidays. So it sometimes took days of hard fights and negotiations to find an agreement and sometimes it was just minutes before the truck had to be loaded before the deal was nailed down. Prices at the end were mostly steady, which doesn’t mean sufficient, with abattoir prices still running well ahead of real market prices, but this is a different problem. What has worked out this month might be a renewed problem next month, because tanners will do everything to squeeze prices down and – as we all know – it needs only one truck unsold to change the market.

One may not forget, that despite the special situation in Europe due to the fresh hide supply chain, the hides are presently overvalued. This can be seen in all the other hide categories which are more directly competing on and with the general and global markets. The weak USD and the exaggerated gains of prices in February and March have propelled German standard hides far away from general levels and sellers were overstating demand in their expectations of where prices could go. The longer supply chain, bigger stocks as a consequence and more alternatives have permitted the international customer base to stay away from our origin for a while. Only massive price concessions would have allowed to attract buyers. Those few who had any immediate need for material had sufficient options to choose from locally, either in raw or in wet-blue, custom tailored as the client needs. To make it even more attractive, this option was not only available at market price or a premium, but generally at decent discounts. Those who had built enough speculative stocks dispose of very attractive average prices and this allowed them to sell at healthy profits even at discount levels. One doesn’t only find this situation in Asia, but similar stories are also heard from the market in Italy. A number of tanners report that they get offers as discount prices for material which is in arrival or already on spot in the ports. So, the market is further segmented with the males still favoured in Europe while cows and more standard materials face massive pressure and limited interest at the moment. The fundamental problem is that the market valuation of standard hides lost ground at the beginning of March. There is nothing wrong with leather demand, but as long as tanners are not able to lift the leather prices to profitable levels it simply doesn’t make any sense to take additional orders just to produce increased losses. Consequently these tanners are leaning back first and waiting to see if their customers are willing to accept leather prices which are allowing profitable productions.