What happened this week: Happy New Year to all our readers! Most people – including us – expected the week between Christmas and the New Year to be the quietest around the season, but failed. It was this one. Holidays well spread all over kept people away from the market. Monday and Tuesday most Asians were still off, Monday was a holiday in most Anglo-Saxon countries too and on Friday in most catholic parts of Europe businesses were closed too if they were not closed anyway until the next Monday. Consequently activity was pretty light and except some scattered mails from Asia we haven’t seen any noticeable interest or discussion about hide purchases. So, the market gossip and activity was left to the few around and the main subject of interest was if this market has now left the downward trend, if this is just a hiccup as a reaction to the long slide seen or if this is already the turn around and prices will now be set for a rise, like frequently seen in the first quarter of a year.

In the end everybody picks what suits him most and the bulls and the bears are all having plenty of arguments. The market friendly ones (including butchers of course) point to the currency market and the low kill which we experience already since mid-December. The pessimists are pointing to the gloomy situation around the globe with a lot of concern how things will proceed in general. It’s true that a lot of commodity prices and indices have bottomed and in some cases decently rebounded. However, in the case of oil for example it is rather a reaction to the political tensions than a real rise in demand.

For leather and its raw materials the situation is still different. True is the persisting strong demand from the automotive industry, but true also is that most other parts of the leather industry do not signal any rebound of interest. The business that is there is administrated, pressure on leather prices continues and everybody is cautious only to take what keeps him busy for the foreseeable future. Tanners still don’t consider present hide prices a bargain already and the outlook still too vulnerable to put any hides away in volume. Which leaves the question of whether the strong round of buying and inventory replenishment which has taken place over the past weeks has a) cleared all stock on sellers side and b) built enough stock on tanners side to stay out of the market for some weeks. In Asia we would believe that not so many buyers still need to run after the train while in Europe it might be a bit different as many European buyers were convinced that the correction would still continue into the New Year and failed to expect the Asian activity and the weakness of the EURO.

Many sellers would love to see the market rebounding and try to push the market now. However, the facts – except the currency – don’t really favour them so far. It is just too early. We believe it will take another two weeks to get a real picture and it would be the best for the market to take a relaxed start into 2012 and to leave things as they are until we know more. Trading was almost non-existent this week. Interest shown was not rewarded with business and some of the leftover negotiations from last week were not picked up again. Not a problem yet, but next week has to prove the real appetite at the start of the year 2012. 

The kill: The kill is really poor. Butchers claim that beef business is still bad (no surprise), export business not there and cattle prices too high. Also here it is just the first week of the year and meaningless. However, we are not optimistic for beef consumption and the kill for the coming weeks.

What do we expect: Supply and currency will support the position of sellers, but before we don’t have a clear picture from the demand side we will not be ready to opt for a rising market. It seems that most tanners have what they need and for much more Euros and USD they will walk away. The only segment where this could be different are top quality automotive hides where supply counts.

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