What happened this week: There is more and more of a holiday mood in the trade. While in Europe people are mainly busy winding the activities down, Asian tanners were a bit more active this week. The number of sales, however, remained pretty limited, because bids were below asking levels and the steep fall of the US$ during the week made a lot of offers obsolete as the week progressed. Buyers were certainly not willing to compensate for the currency market and as a consequence a number of bids and requests were not completed. But despite this, one could see that there is the expected need to buy in China and upholstery tanners will eventually have to replenish their stocks for the period after their New Year festival. They are obviously not in a rush as they know that their main suppliers, as well as their competitors, will also take a break, so there will be no activity in raw materials. As in previous years, many of them consider this an improved position for carrying out purchasing negotiations with their suppliers, and as a result it was pretty obvious that many interested buyers from the Far East are still at the research and analysis state and didn’t feel under any pressure to make immediate decisions when their price ideas were not met. In addition the purchasing terms are further deteriorating, with extended L/C terms and other requests burdening the price calculations. So, it is quite difficult to make ends meet at the moment.

On the upside, we have to remember that there is interest and a need to buy and the gap is not so wide at present that it could not or will not be closed in the weeks to come. The market still remains tightly trapped in the trading ranges we have seen for almost all of 2005 and the really influential issues on the revenues from overseas sales are more the terms and currency rates rather than the hide market as such. The balance of supply and demand for dairy cows remains quite intact whilst the rest of the market remained reasonably quiet.

In Europe some of the December programme sales still need to be finalised. Abattoir prices are not helping much by staying more or less unchanged, which leaves little room for the declines which are expected by the tanners. Interest in light weight heifers and other side leather-related raw materials remains good and sales are being concluded without too much trouble.

The endless conversations and discussions about the Chinese Import regulations remain confusing and the varied interpretations of the news circulating remain conflicting. The only thing we can add to this is the fact that Chinese tanners and buyers seem to remain pretty unimpressed by the issue and it is the trade and the raw material suppliers who seem to be more bothered about it.

The kill: The decline continues and we were taken aback by the sharply reduced average weights, in particular for dairy cows. This is pretty unusual for the season and we can’t find any real explanation for this trend at the moment. Next week’s kill will be the final one before the Christmas week when it should fall further towards the end of the week and remain at lower levels in the week to come. However the total for December should be good due to the reduced number of holidays this year. 

What do we expect? The market continues to paralyse itself. Positive and negative developments cancel each other out and still no real new direction has been established. There is no reason why this should change over the last two trading weeks in 2005 either. Tanners will continue to battle for lower prices while sellers feel cushioned by low inventories and an expected reduced slaughter.