What happened this week: The Shanghai fair is behind us and as usual most of the industry met up there. The show is growing; more chemical and machinery companies are exhibiting, and the domestic attendance and number of exhibitors is steadily increasing. Due to the participation of the Chinese tanners’ association, the attendance was impressive on the first day and fell back on the following days. However, even on the last day the aisles were far from empty and stands were still quite busy. This was interesting in light of the worrying news that we’d heard in the in the weeks before about the lack of orders, as in Shanghai it was hard to find any tanner who was complaining about the number of orders.

Most tanneries confirmed that after a low season from May to July customer interest started to pick up in the second half of August and they were also optimistic about the near future, so, the classic ‘we have no orders’ or ‘we are expecting the same’ was hardly heard at all. This applied to mainly Chinese tanners with an established customer base in all segments of the leather industry. Even the furniture and garment tanners, whose expectations had been quite low, were in a much better mood than anyone would have expected.

So far so good, and one would have expected that this could have been transferred into a decent round of sales at steady price levels, however, at the end of the day our concerns that business could become tricky - in particular for cows – was confirmed and concrete sales were difficult to book. It needed quite a bit of effort to pin customers down and in most cases it needed price concessions of a couple of per cent which will hurt, especially combined with a weaker US$ rate.

It was quite peculiar, because the need to buy could be felt in many cases and shipping times are also pretty short, which confirms the reduced inventory position, but leather prices remained under pressure. Chemical and energy costs are rising and, for the moment, there were more sellers with the wish to have business booked and to keep the ball rolling than those willing to wait for a better time to come in the near future. Speaking to suppliers from around the world everyone seemed to be in the same situation, no matter which part of the world they came from. Another general complaint was that of profitability. Costs are rising everywhere while revenues remain under pressure.

To round up, we think that one has to be positively impressed by the prospects for leather in the consumer business, but at the same time there is little hope that this will convert into higher raw material prices in the short term, at least.

The kill: We can’t find anything new and numbers remain steady. The process of consolidation in the beef industry is continuing with the next takeover set to be the VionFood Group in the south of the country and the announcement of the closure of one slaughterhouse in the west. This will not be the end and more consolidation is sure to come.

What do we expect? Next week the trade will be busy digesting the situation. Basically this should mean that cows will need to be adjusted downwards at the abattoirs for September to reflect the market situation. The rest should remain pretty steady, although we would not be surprised if the male market runs out of steam as time passes. Light and premium materials look very solid or even better.