This week: An eventful week. We cannot judge how the week went for those who did not make the trip to Shanghai. However, for those who did make the trip despite all the misgivings and low expectations, you will hardly find anyone who will have felt it was useless to have invested the time and expense.

We think that there will be a fairly uniform opinion about the fair and about the market in China. There are two completely different markets and therefore two completely different situations. The driving forces behind both are price and the sector in which one is moving.

Let’s start with the one that is difficult, not to say really bad. The business for shoe upper leather in China remains bad and the order situation for tanneries absolutely unsatisfactory. This has a corresponding effect on male hides and those who went to the fair with hope will probably have flown home disappointed in every respect.

The situation with cowhides is completely different. Many tanners from northern China also came to Shanghai to attend the conference of the Chinese Leather Industry Association. As is so often the case, they used this as an opportunity to visit the fair and meet suppliers on the first day. From the first hour, these tanners tried to buy cows, and not only in Europe, but also in the US. At first, of course, with bids well below the market. They realised that suppliers had noticed the situation very quickly and were therefore not prepared to make major concessions. This situation continued until the end of the fair and as long as one stayed below the magic limit of $30 for the standard types, it was possible to sell almost any quantity of cowhides without any problem.

Even though there were some colleagues who claimed that they were able to push through even higher levels, we do not believe that this was possible in larger quantities, if at all. At prices below $30, some demand has probably remained unsatisfied. The big question then, however, was whether there was any coverage at all for these quantities by the demand for finished leather. The buyers were mostly tanneries that only produce wet blue, have small stocks of raw material, and assume that for the local market the goods can then be resold to furniture leather tanners at a small margin.

Only the next few weeks will show whether this is sustainable. One must be concerned, however, about the still considerable stocks of male wet blue hides in Europe and the US. The All China Leather Exhibition in Shanghai also gave no indication that the leather industry will improve sustainably enough to sell off these quantities in the short term.

Another problem is the cheaper tanning costs in China and south-east Asia, which make reasonable prices for semi-finished products in-stock from Europe and the US seem hardly possible without a significantly rising price level overall.

Chinese customers describe the economic situation in China rather negatively and are also not optimistic that this will change quickly. Hopes are pinned on stimulatory measures on the part of politicians, without it being really clear what short-term improvements this will really make possible.

The kill: The kill is still in holiday mode. Volumes are hardly changing. However, cattle prices have risen again somewhat. It now remains to be seen how production will develop from mid-September. However, we do not expect a strong increase before the end of October.

What we expect: In our last forecast we were right about prices, but completely wrong about demand. Even if it is only for the female hides, we can say that the pressure is definitely off the market for the next few weeks. For the male product, no improvement in the situation is foreseeable. What motivates individual competitors and slaughter companies to announce higher prices for bullhides for September will remain their secret. Perhaps it would be relatively sensible to think about the long-term consequences and recognise the market realities. Otherwise, it will be very interesting to see whether tanners try to cover the open orders for cow skins in the next few weeks or whether it is just one of the sometimes typical mass movements of the Shanghai fair, based more on emotion than on facts. We will know more for sure by the time of the fair in Milan.

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