This week: As far as Europe is concerned the situation has seriously changed and we have returned to a pattern in the market we were used to in the past. In the first quarter, tanning operations in Europe are in their busy period and this means a regular supply of raw material has to be guaranteed. Holding raw material stocks is no longer popular and just-in-time deliveries are common practice.

On the supply side, the kill traditionally falls after the holiday season. In 2021, the situation is intensi-fied because of lockdowns and all restaurants being closed. Better cuts of beef are not selling well and we understand that the cold storage is swelling over with imported beef as well as local production of the better cuts.

A good number of tanneries failed to take time in the last quarter of 2020 to secure sufficient raw mate-rial and have planned too tightly. Extra stocks that had been burdening the market for a long time have been shipped to Asia and this has meant that there was not much cushion to satisfy the demand from the industry.

What always happens in our business is that the situation begins quickly to snowball without any re-flection of commercial logic or the longer term. Sellers who had been suffering for a long time, sud-denly feel that they are having the upper hand and this is quickly converted into a very ambitious and rigid attitude when it comes to hide sales. The price trend begins to feed itself with suppliers no longer afraid of getting stuck with unsold material and the loss of an order or a bid is meaningless because the next interested buyer is just around the corner. This may all be correct, but in the long run the raw material market has to reflect commercial sense.

Anyway, this week it was mostly a European market. If you convert the European prices into the glob-al price grid, many hide types are already far out of range. There has been a normal enquiry situation from Asia, but sales at the prices being discussed in Europe at the moment proved impossible. In par-ticular male selections have absolutely lost touch with the base. For cows the evaluation of the real sit-uation is pretty difficult in Europe; a certain price level has been established in Italy that seems unob-tainable in Asia. Tanners in China are looking still for high-quality, heavy cows, but on one side there are not too many around and the prices they want to pay are not really attractive, considering also the hassle of shipment.

We would consequently say that the amount of business being closed overseas is dropping sharply and sellers are taking advantage of the easier business in Europe. The truth is that many tanners in Eu-rope have missed the chance to build an attractively priced inventory level when hides were in abun-dant supply and cheaper in price. With the corona crisis covering everything up at the moment it is very difficult to analyse how well customers are prepared at the moment. Are they actually generating sufficient margins and cash flow to handle the rest of the year? We still see a lot of tanners that are far from working at full capacity. We closed last week with adequate sales but with a very uncertain situa-tion about where the real market price is located today.

The kill: The kill continues to be unpredictable from day to day. The slaughter numbers are bouncing up and down and, on average, we would say they are not too far away from what one would expect at this time of the year.

What we expect: The focus will now be on the abattoir prices that have to be paid for February and if they are going to be in line with the general market at the tannery door. China is now heading for a hol-iday break. There are still a lot of hides in the shipping pipeline and, by the end of March, leather pro-duction will begin its seasonal decline. The easy times are well behind us now.

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