What happened this week: It is pretty much the same as the last few weeks. Market activity remains subdued for various reasons: the seasonal break ahead of us, a holiday on Thursday in the southern parts of Europe, the ‘abattoir buying party’ and, last but not least, the cautiously awaited decision about the import and VAT tax regulations by the Chinese government. News and final decisions are expected soon and maybe on Monday we will know more about the situation. It seems, however, that Chinese tanners are less excited about the subject than the rest of the world. At least in our case we can’t see any delay in shipments or other interruptions to business processes in relation to the decision. Well, as usual the argument is being used by buyers to justify bids below the market level. So, in the end, sales were reasonable, but basically only boosted by some of the regular renewal of regular programmes. On the ‘free’ market, sales were again isolated and widespread over types and markets. A bit of everything, everywhere describes it best. The US$ again remained in its long-term trading range this week. It finished the week however, on the lower side of the trading range around the €1.18 mark.

Most of the discussions in the trade are far less about the market trend, but about the margin situation. Reading between the lines, most players are complaining about the margins. Many tanners are also reporting shrinking margins and lower expectations for the coming year and many are now expecting that the raw material markets will adjust accordingly to compensate for higher costs and the ongoing price pressure for finished products. The attitudes from the different markets also represent, in our opinion, the business situation. While the Italian tanners, for example, are obviously considering securing prices and supply as more important than the chance to save, their Asian counterparts are, in the majority, reacting in the totally opposite way. Excluding gambling and speculation, this can be taken as a clear sign of the present margin and order situation. The same also applies for various tanneries of male hides where the automotive tanners in particular are fighting against the market, using the argument of declining leather prices and increasing demand for more economical price levels. This might end in a shift of raw material use and diminish the dominant position established by automotive tanners in Europe in the male market over the last decade.

The calf and kip market continues to be red hot. Selective suppliers are trying to push this market hard and asking levels have increased sharply again. We don’t believe tanners are following yet and, whichever way it goes, it will not be a success story. When prices rise too high, the product might disqualify itself from the market quickly and could be eliminated from the upcoming collections. It seems that history always repeats itself. Prices during the week were little changed. While heavy bulls had to give a little most other items were at levels that might be called a weak steady.

The kill: The kill is now descending faster than expected. Numbers are still acceptable, but the kill is definitely now past its peak and except for some short hiccups due to the season, the descent will continue from now on.

What do we expect? We are still eagerly watching the Asian market and the US$. In Europe things will now settle to new levels which might see lighter cows under pressure and heavies still steady. Overpriced heavy bulls and some other niche hides may now face more headwinds. The rest of the market seems to be steady and a round of buying from Asia could finally stabilise the market as we go into the coming year.