What happened this week: Most people were just interested in the developments and results of the Lineapelle leather show in Bologna, Italy. Let's not discuss the attendance. It is really not important how many people are around and even less in Bologna. The important issue is the question of how the exhibitors rate the quality of their guests and the impressions they gather from the information they obtain from the discussions.

For others, including us, the visit is one of the best ways to gather information and impressions about the leather types and colours which will most likely influence the demand for raw material six months later. We got the impression that many exhibitors found some relief and went home happier than they came. This applies mainly to the fashion and quality leaders of the industry who delivered a quite positive impression about their business despite the record high prices for raw materials. Many confirmed positive financial results for 2013, which is better than expected after the sharp rise of raw material prices last year. How much this was related to comfortable raw material stock positions or if leather prices had moved higher than one was thinking was not totally clear.

Less expensive articles based on cheaper raw materials also reported good performance while the medium section struggled, and this is still the bread and butter business for many producers. The overall impression was of nice, bright colours, with top and medium-quality suppliers sticking to their specialties and new articles, which are possibly in the position to clean some of the medium and lower grades up. This would be good news, too.

So, all in all one has to admit that it was one of the better shows and tanners were far more relaxed than the raw material situation indicates. However, let’s not forget that this is just small window of the leather world and pretty much based on the leather sectors which have been performing well for some time.

In discussions with a more global and general focus, more concerns were heard. The situation in China remains uncertain (waste and pollution controls, money issues and more government action against smuggling and illegal imports), the growing tension between Russia and the West over the Crimea and the strong euro, which is beginning to cause the European Central Bank headaches because it is hurting exports and in particular the ones from the weaker countries in Europe that need exports for their recovery. It could not destroy the good mood in Bologna, but many people are beginning to understand these factors cannot be ignored.

Business in Asia was not really in the limelight this week. Most tanners there are waiting for their visitors prior to the APLF fair in Hong Kong [March 31 to April 2] to see what they have to offer and how stiff they are going to be on prices.

The low kill in several parts of the world support sellers’ positions but do also not erase the problems that part of the tanning industry is facing, in particular in China. Although nobody wants to talk about it, there is a decent cash problem for a good part of the industry. If the rumours are correct that many importers in the south of China are not willing or in the position to use the route via Hong Kong and a good number of shipments of finished leather and raw materials are threatened to be parked in warehouses in Hong Kong for a while, it could affect trade and business into spring. We will learn more at APLF.

Sales this week were mainly focused on the 'Italian types'. The usual fair sales were booked while business in Asia was almost completely missing. Prices were mainly around steady and variations were minor around the last prices made. The sharp drop of the kill has begun to hurt the regular supply chains for fresh, chilled bull hides. 

The kill: The kill continues to be low and this applies in particular to the male section. This is not really a surprise at this time of the year, but many were not well prepared. The shutdown of one of the largest slaughterhouses in the north for vet issues has not made it easy for some supply programmes. 

What we expect: The USD ran close to 1.40 this week before dipping a bit. This week and next a lot will depend what the US sales forces do prior to APLF and the impression the tanners in Asia have about their chances to get prices down into the spring and summer. It doesn’t seem that buyers are too desperate at the moment, special cases excluded, and the effluent issues will also have an effect. Consequently, we don’t think there will be too much activity and the prices trend will be mostly based on the currency and politics.

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