This week: In our area it was a relatively uneventful week. Suppliers are planning carefully. Low slaughter and the considerable disputes at slaughterhouses are allowing suppliers to act very cautiously. Current purchase prices, combined with high transport costs and the relatively weak US dollar require increased asking prices on the offer lists. In Asia, this has led to reluctance among buyers; it is clear that the tanners are not yet convinced that these raw material prices can ultimately be reflected in their leather prices.

One is beginning to get the impression that market developments in the first six months of 2021 could see a similar development to the ones seen several times in the past. In Europe, slaughter fell substantially in January, in the busiest season for leather production. This has led to short-term supply bottlenecks here and there, and during this year it has been even more pronounced because of difficulties with transport problems from the UK after the Brexit.

In some cases, sellers were too optimistic about their volume expectations. Delays in delivery and the fear of not being able to cover current production on time forced European tanners to accept increased price demands. This was the starting point for fast-growing optimism on the supplier side. The result is well known. Now, if history repeats itself, we could enter into the next phase of the cycle, with suppliers trying to ride the wave and stubbornly trying to push the market higher.

At the same time an increasing number of tanners are beginning to think about the end of the production cycle for the season and the price discussions for the next phase. This applies in particular to the upholstery market, which has been the main driver for prices for a while now.

Usually the cycle ends around the end of March or in the first weeks of April. It is quite common for people to be surprised when it actually happens. This year only a substantial rise in demand for leather from the side leather tanners can prevent this change in cycle from happening again. There are many good reasons to believe this could happen.

Time will tell and in four or six weeks from now we will know the outcome. For the moment, the market remains driven by the present situation and, as far as we are concerned, the coming weeks will become pretty challenging. On one side the beef industry continues to play the supply card and on the other side the tanners will become much more sensitive to prices after the steep recovery since September last year. History and logic suggest that any reaction will only come after a period of unsold hides.

Business this week was mostly concentrated on discussions with Asian buyers, who politely said no to the new asking prices. At the prices valid before the holiday break, we think everything could have been sold, but that is no longer enough to cover the present prices that have to be paid at the slaughterhouses. Consequently, only very few sales were made and those mainly for the specialty types and not the mainstream. Most discussions were postponed, something that has happened with European customers too. Nobody wants to take decisions before the new reality for the month of March at the slaughterhouses is known. This situation has led the business into a temporary stalemate.

The kill: The kill this week has moderately improved. The numbers are still far from being impressive, but at least the downward spiral has been stopped. We tend to believe that the present status is going to last for some time now.

What we expect: Soon people will begin to test the waters for buying for March. It might take a while until agreements can be found at the abattoirs and, most likely, this will take until the end of the following week. However, some price decisions must be made and we will see who is the first to blink. For most types, the market is now beginning to run out of steam.

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