What happened this week: Our forecasts from last week described the market situation this week quite accurately. Activity slowed down quite remarkably due to some kind of semi vacation status in Germany. The holiday week in China, other local holidays in Asia, plus some school holidays and the national holiday in Germany on Monday have all left their mark. The market also lost a bit from the currency tailwind towards the end of the week. Trading activity came down with the exception of persistent demand for light weight material.

With most stocks have been exhausted, tanners are now desperately looking for more material at the same price levels, which is quite unrealistic. Price is one question, but the supply base for weights up to 15 kgs is very limited and everything points to the classic market situation for this material. While a year ago nobody wanted to know with this range, it has now returned into the fashion collections and created excessive demand for supply potential. Consequently prices will go up and even some needs will remain unsatisfied, which in turn will create tension and will also mean the article will not be included in many collections in coming season. So, history repeats itself.

The abattoir hide market in Germany remains in a pretty chaotic state. Due to a significant return of furniture leather orders back to Europe - or better said to Italy - raw material demand is shifting, not only geographically, but with the revival of an acceptable price/quality ratio. Medium-to-higher end, at acceptable prices, are the main focus of interest. The manufacturers of these materials do not only source in the lower end market, but also in the higher end where prices of finished leathers have climbed too high and more attractive alternatives are being considered. Since the Italians are the masters of this market segment they are now harvesting the largest chunk of the development – while the high price and low price producers are losing market share. So, the hides which were suffering the most from the price battles are now seeing the strongest renaissance – the average quality dairy cow.

The question remains as to whether this will eventually lead to higher prices and if this is going to be a stable trend in leather fashion. This would be quite a change if the medium price sector in furniture leather enjoyed a revival. The aggressive insistence of the South German butchers to push prices further up is also surprising. At the same time automotive leather is now facing similar price problems as the furniture leather sector has in the past. It is going to be interesting to see how this conflict will eventually be resolved. The present price difference between South German material and other markets is not covered by the real value of this type of hide and needs to be adjusted one or the other way. 

The kill: The kill was a bit lower last week which can only be explained by the extraordinarily warm and nice weather. Hide weights are climbing, but less than one would expect having already reached October. Cows, in particular, are coming in lighter than expected. We can’t see any major changes also in the coming week. 

What do we expect? It seems that we have reached a market junction. If demand persists as over the last weeks, more sellers will raise prices. Whether this is going to be successful…we have our doubts. Leather business is better for just a small few and other production costs are rising while leather prices across the board are not moving and, if they are, it is in the wrong direction. We might see a shift in articles and raw materials, but there is no real demand driven rally in leather products. So, we still believe that there will only be little changes until the end of the month and the Bologna fair.