What happened this week: There is still not much going on and week by week more tanners in Europe are closing their plans for the time until the holidays. This doesn’t apply to everybody, because some – in particular contract and automotive tanners – are keeping productions open and are now trying to take advantage from the shutdown of their colleges. The Asians have a similar attitude, but when too many follow the same track you face possibly a traffic jam. Well, it is not that bad, but at least not all buyers have disappeared and a certain amount of business can still be done. However, the interest and activity is not enough to turn the market around and despite sales, the pressure on prices could not be totally removed. European buyers tried to buy aggressively cheaper, while the returns from Asia were again depending on a lucky hand on the currency market. The USD fluctuated again between 1.42 and 1.45 and selling hides and the currency in the right moments determined if a sale was satisfying or not. Generally it can be said that the sales and the market reflected the situation on the leather market with extra heavy and good quality males having still a pretty stable performance while the lighter and the female end facing stronger headwinds. Tanners bids were pretty ambitious at the beginning of the week and it need days to work bids to levels which were finally negotiable. Again it was a week where sales were pretty much depending on the general market opinion of the buyer and the seller.

The market seems to be divided into two parties. On one side those who believe in a further slide into autumn due to the low season in leather production and the opponents who believe in a strong recovery of leather and raw hide demand after the summer break with a sharp rebound of prices. According to their opinions they run their position. Some warehouses are said to be pretty empty and others are said to be pretty full and all information seems to be pretty reliable. This does not only apply to raw material people and business, but includes the semi-finished positions and activities too. It seems that both positions are extending over the past weeks.

Since buyers at the moment are only accepting material at steady levels at best and in most cases even only lower and the demand side is not big enough to enable sellers to ask and achieve higher prices, the trading activity is limited to buyers and sellers who make their opinions meet at the bottom end of the present price range. Others are staying on the sidelines. Sales during the week were either the result of renewal of long term programs or a few bids from Asia which were workable and supported by the stronger USD during the week. It was consequently a similar situation to the previous week.

Apart from the limited trading volume financial issues were in the focus of interest. Getting L/Cs from China is still like pulling teeth. They come, but it needs constant reminders and what is supposed to be opened. In the good days of cheap and easy money it was normally a question of hours or maximum a night until the L/Cs arrived. A similar situation is seen with deposits which need to be paid for shipments. One hears that some suppliers are affected by the consequences of the tax investigations in China. With a number of prosecuted importers in China disappearing, a number of payments for goods arrived are also missing and causing some suppliers cash-flow problems. The tax evasion seems to prevent some trader/importers in China from taking further long positions for the moment which means less demand as well. For the moment.

In the end the abattoirs also realised that prices have to see adjustments now and finally another moderate (insufficient) decline was achieved for the July production.

The kill: Nothing new. The slaughter numbers remain on low seasonal levels and it is good that the regular supplies are cut in volume by the summer breaks, so that fresh supplies don’t face interruptions due to insufficient kill. It seems that in our area this will continue until mid August when school holidays finish. Domestic beef demand and export sales at present do not allow higher production.

What do we expect: The low  is kill is not building any major pressure on prices yet and as long as those who are holding stocks not getting nervous prices will most likely stay in the present very tight trading range. With no other market seeing any upward trend at the moment, only currency fluctuations could set a positive trend in the short term.

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