What happened this week: Another week where things are neither here nor there. The Chinese customer bases – today the largest for our material – were already winding up for their holiday week starting this weekend and European buyers have also been quiet. Buyers are covered and feel that their chances to buy cheaper are increasing. However, sellers are still showing strong resistance over the world. This continues to widen the gap between buyers and sellers and makes business increasingly difficult. Selling at full and commercially adequate prices is hardly possible today. The market continues to be massively faked by the automotive hides and business. It is again a crucial mixture between forward positions and the large order books of the German car industry everybody hears and reads about in the media. With strong demand for high quality automotive leathers, overseas buyers are participating in the game and buy selected semi-finished products where not everybody can ascertain what he bought. As we have seen already a number of times before, when demand for premium automotive raw material exceeded supply or prices had gone too far up we see now all kinds of bending the descriptions and supplies which opens the door to many kinds of product alterations.

Checking the history book this is not the first time of such a scenario and it was always initiated by the demand from the automotive industry. However, when hide values had been stretched too much the result was also always the same. Levels at the end flipped back to reality eventually. When this is going to happen, nobody knows, and it requires that the economical facts are breaking through, i.e. increasing numbers of unsold other grades and types and on tanning levels rising stocks of unsold average quality selections which trigger questions about their realistic valuations.

A number of tanners are already starting to worry about the selections from production that they can’t place in the market. As long as hide prices rise it is nothing really to worry about, but when prices fade it will become an increasing problem – one of various reasons why so many don’t fancy a revaluation of the hide prices. The ones who are a bit more ruthless are the Chinese and they are possibly the ones putting the highest pressure on the market. Some say the Italians are also following by indicating aggressive ideas for the coming weeks for hide prices. However, it seems, that the next real moment of market reflection might be around the Bologna fair where, after Shanghai, one has the next chance to generate actual market feeling again. For the moment high quality materials are facing price problems too, but they still find enough buyers to remain in a pretty solid position. For the more average type of hides the situation is possibly more difficult and as in many markets around the globe, we think that the situation is painted much better than it actually is.

Trading this week was rather spotty again. Selling is much harder work today and not the 'collection and selection of interest' which it had been for so long. Money in form of L/Cs and payments is getting also more difficult and some of the Chinese customers were already hiding behind their holidays. Sales this week have been a bit of everything at steady or fractionally lower prices, but one had to go out and find the customer and not wait for him to call.

The kill: The kill dropped pretty sharply. The very warm late summer weather kept farmers busy with other projects and consumers out of the shops for beef. In particular the kill for males fell substantially, which supports those who see the market as supply driven. Export contracts also seem not to be in play, so we haven’t a clue what is going to happen next week. As long as the weather does not get worse we think that the kill will remain behind seasonal averages.

What do we expect: We could just repeat our statement from last week. Next week Chinese buyers will be on holiday and it doesn’t seem that they will use their mobile phones to check for the hide market. EU tanners will most likely now wait until Bologna to check the market. We fail to see any see any serious need to replenish stocks in the short term. So, we remain cautious and expect hide sales to continue to be hard work also next week.

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