This week: With the end of the holiday week in China last week, this week will be another milestone in the market direction until the summer, at least for the general trend of the commodity hides. Niches and specialties may take their own roads. The Chinese market has become so dominant that activity there will once again set the price trend for the coming months.

Basically, we see a completely normal spring season. In the US, the kill continues to be high and possibly even set to rise with the progress of the barbecue season. In Europe we see the opposite. Beef consumption declines, cattle will be back in the fields and beef consumption will still be low with the slow reopening of restaurants and start of the tourist season. A number of public holidays in May depress slaughter numbers. With falling weights, hide prices will be once again difficult to negotiate because European packers don’t pay much heed to global market trends.

From China there is more information about significant stocks of raw and semi-finished hides. If this is true the owners will have to manage the problem of using up stocks at the same time as keeping prices stable. If not, leather manufacturers would have to make up volumes with additional purchases at current asking prices, which as substantially higher. The demand for finished leather is the determining factor. This is always difficult in the second and third quarters of the year.

Markets move when there is a fundamental and unbalanced situation between demand and supply, or a speculative momentum. There is little to point to strong demand in the near future. Regular replenishment in Europe is a stabiliser, but it requires a lot of optimism to bet on a higher level of hide prices in the second half of the year versus the first. It remains unclear if all the hides Chinese buyers bought in the past six months were to cover existing leather orders or if a good portion were bought for other reasons. Nobody is willing to discuss this subject seriously at this stage.

Consequently anything can happen in a market situation in which the physical balance of supply and demand does not apply. If we assume that the wet blue stocks are a surplus and will be resold locally, this would also absorb any potential additional demand for raw material imports.

Trading and sales this week was totally focused on the regular programs in Europe. We did not escape and have concluded what was due. Volumes were regular. Negotiations did not last long because there is not much room for discussion. On one side we struggle from the lower kill to keep programmes running. On the other side prices have risen too much and too quickly. Tanners are also watching the market in the US, where the first cracks in the trend have appeared. 

The kill: The kill is sharply down. With several holidays ahead and restaurants closed, as well as missing tourism, there will be no short-term recovery. Weights continue to drop as well.

What do we expect: The low kill is a stabilising factor, but it is temporary. The fundamentals are set for a correction, but it might need some time to spill into our markets with more resistance and hides remaining unsold.

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