What happened this week: In the south of the country the abattoirs became rather aggressive with heavy male hides, with news circulating of a stabilising automotive production. We understand that tanners were far from willing to accept such jumps and only a fraction of the asking prices were achieved. However, once started, it is always very difficult to get such conditions back under immediate control and concerns were raised that these ambitious moves might be more than premature with tanners strictly refusing any further price increases.

We had seen a stabilising hide market until February, gradually reacting to a positive outlook of global consumption in combination with the seasonal cycle of production. With lockdowns in the major production centres, the collapse of sales and interruption of supply chains, raw material prices went into sharp decline and reduced demand saw a rising number of hides not worth processing, with many others stranded in the pipeline. The high level of uncertainty kept tanners out of the market and on their return, August replenishment was less than expected and triggered from the markets with the longest shipping times. China was the best performer and a base was found for the medium and better hides, with deflated prices able to regain a little ground depending on quality and position.

When tanners in Europe returned from their holidays, they were a little surprised that the mountains of hides they were anticipating were, for several grades, not as high as expected. They also had to accept the time of continuously falling prices had come to a temporary end. Except for a reload effect after the lockdown and summer holidays not much has really changed in the market. Leather demand is normalising in some sectors, but the major volume from the shoe industry is still not convincing. Trade this week was far less exciting.

Tanners are resisting any major price increase, there are still plenty of stocks around, including wet blue, except the isolated premium grades. For the regular grades, buyers were willing to pay steady money, while for premium upholstery grades, another few cents were achieved. For the critical types for the shoe industry, which is males from 25-40 kg, demand continues to underperform.

The kill: The numbers continue to rise. The first case of African Swine Fever in Germany has led to an import ban for pork into China and South Korea. This could shake up the market for beef as well, but the consequences are uncertain at this moment. 

What we expect: The abattoir buying, African swine fever and rising covid-19 cases, again, create an uncertain terrain for future business. The seasonal rise in activity should protect us from sudden and bad surprises, but it might be wise to play safe and check the next steps well.

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