What happened this week: There is a full focus on specific hides from specific markets and it seems that a good number of tanners left for their summer vacation without sufficient cover but in full confidence that, after their return, sellers and the hides would be waiting for them as they have been since the Coronavirus pandemic started. This might have been true, but some of the big sellers have changed their strategies from desperation to ambition. This applies in particular to the European heavy male market and its major destination, the automotive tanners.

Despite a lot of unanswered questions hide sellers and packers have become quite ambitious in their pricing. Several tanners are reporting that they were advised about substantial price increases that will apply the moment the current contracts expire. News of this began to spread quickly last week. A lot of tough discussions have begun because tanners do not see any particular reason for any major upside correction in their raw material prices. Leather orders from the automotive industry are certainly gradually getting better, but we are still far away from full and regular production levels.

 The most frequently asked question is where all the hides are stuck; it’s certain that not all the available hides have been processed into leather over the past three or four months.

Starting from this, quite a number of players assume that the trigger for all this is speculation by meat companies and possibly the owners of unsold stock. They may be trying to take advantage of some uncovered positions and the relatively subdued slaughter of these particular hide types. It seems that the players are still far from agreement.

The second sector generating excitement was demand for cowhides in China. Chinese upholstery tanners continue to look desperately for heavy, high-quality female hides for the superior end of upholstery leather production. The situation is a bit different, because Chinese buyers were never completely absent from the market and have continued to buy whatever they could find at the prices they were willing to pay; they always found somebody who was willing to accept.

The number of desperate sellers is now definitely drying up and across the board some price increases are being asked. Most of it will just compensate for the weaker US dollar and the higher freight charges.

Sellers have become more strict and unwilling just to accept whatever bids come in. That initially led to a total stalemate because buyers were not willing to move. The more last week progressed, however, buyers realised that it might be better just to accept the asking prices because, historically, prices are still very low.

Apart from these positive sectors, the remaining hide types continue to be in the doldrums. It’s still too soon to talk about a turnaround; it will be October before we are able to confirm that the leather business is improving. At the moment we are just seeing necessary replenishment from tanners who might have taken procurement a little bit too easy in recent months.
Sales numbers this week were adequate, but not evenly spread. Prices made fractional advances without really being pushed to new levels yet.

The kill: The kill continues to struggle, but we expect moderate improvement in the weeks to come.

What we expect:

All eyes will now be on the abattoir prices for September. Too much ambition now could mean a fall again in October or November.

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