This week: The general market agony that we have seen for the past two weeks continued. It is less about missing demand than about limited offers, with the material that is available being circulated being at relatively high prices. The above applies in particular to the markets in Asia. European suppliers are finding it extremely difficult to continue offering regular volumes without having any clear idea of how much these hides will cost at the abattoir door.

Some slaughterhouse groups in the EU sent offers around early last week, a shocking event for agents and customers. Prices were up by a large number of US dollars, which had to be analysed and digested by the markets. We do not believe that these offers received a positive response, but tanners in China seem to believe that there is a global shortage of raw material and, without paying the asking prices, they do not exclude that the market trend will continue upwards and it is only a question of how much and when.

Such a situation is almost the classic one for producing stalemate. Buyers and sellers like to see who is the first one to blink. At the same time, both parties at the table see no need for immediate action. Buyers in Asia are still sufficiently covered, as can be seen by their relaxed reaction to the continuous delays in shipments. One should have expected that these delays, which in some cases are adding up to four weeks to delivery times, would raise concern and provoke the usual aggressive requests to ship earlier. However, for the time being, buyers seem to be happy to have cheap hides still in the contract book and do not require them for production immediately.

On the positive side there’s also no concern about declining leather orders in the upholstery industry. We would think that, into the summer, orders for upholstery leather will fade, but as far as our clients are concerned they remain entirely positive.

The price of hides is a major worry because full compensation for today’s replenishment costs cannot be expected. However, it seems that the general mood in China is positive and buyers believe that the market will sort itself out at last and leather prices will follow. To avoid any misunderstanding, the above applies only to the upholstery market. The situation for shoe upper and side leather in general is far less optimistic and we see this reflected in the pattern of interest and the bids we are receiving.

Price calculations at the moment are based on the consumption of upholstery leather. Classical hide types for side leather are no longer valued on basis of side leather prices, but are converted on the basis of yields in the production of upholstery leather. This is leading to a new price structure between for different male and female hides up to 40 kilos. The old school spreads and ranges do not apply, at least not when we discuss business with clients in China. Sales and discussions in Europe were again postponed. Everybody is waiting to see what the abattoir prices are before taking a decision.

Sales this week were mostly into Asia and consisted of a limited number of hide types. Some low grades were sold for price reasons and some females when they fitted into the price range of the buyer. The price levels we have reached in the meantime for the premium, top and cows, which were so popular all winter, seem now to scare customers away.

The kill: Everybody says the kill is low, but we don’t tend to agree. It is just where we would expect for this time of the year. It is less than in the fourth quarter, but nothing unusual.

What we expect: Next week we should know more about the abattoir prices for March and they will determine what happens next. European business will resume and the outstanding agreements for March will be closed. Asia is becoming more price-sensitive and we think little will change.

Share this story: