What happened this week: Well, nobody could say that the fair in Hong Kong was not exciting this year. There was plenty to talk about and a lot of work to do. While the first day was busy with informal meetings and discussions it soon shifted to serious business talks and we would say that it is long time since we have seen so many active stands and such intense meetings. Visitor numbers were good and Wednesday and Thursday morning were best described as crowded. At the beginning of the show most overseas visitors were trying to figure out if the tax issues (the import tax in China and the anti-dumping tax on shoes in Europe) would have an impact on the market, as was expected. Most figured out pretty quickly that it was a waste of time trying to discuss this at length, as most people were more interested in getting down to serious business as quickly as possible and these issues soon disappeared from the agenda.

Although opinions on the show and the market will still differ, we assume that the vast majority will admit that the mood amongst tanners involved with side leathers remains quite positive and there is a fair chance that we will see another positive season ahead of us. A good clearance of shoes over the winter, strong increases in shoe sales in the emerging markets, and the current ladies’ fashion that will support leather on into the next winter season all add up to a positive outlook for shoe leathers. Leather accessories remain in fashion and most brands are reporting rising sales for bags and/or other leather accessories which in turn are attracting more brand names into trying to secure a share of the business or trying to sell licences, which has been the strong side of the business so far.

Some question marks still hang over furniture. Although upholstery tanners were present at the show and were seen to be buying cows, we still fail to see the strong retail support for leather furniture at the moment. So, this leads us to believe, rightly or wrongly, that this demand is either the last coverage for this season or is a case of tanners securing raw hides before the custom book expires. As a consequence we do not share the enthusiasm that is apparent amongst many, even though the opportunity for sales was good and there were incremental price advances.

Garment leathers were almost a non-event and automotive leather seems to be battling with the pressure on margins and finished leather prices, which do not correspond well with the raw material market that we have seen in the recent past. Drawing a line under the week, we were left with the impression that there was a good mood and excitement, but there were not any spectacular sales figures. Sales were normal and regular customers were satisfied to accept asking levels, which is more than one normally expects from a trade show. At the same time key suppliers are handling the situation responsibly and tried to remain realistic about the potential of the market by not trying to push it over the edge.

The kill: The kill remains reasonably steady, but with the change in the weather from winter to a rainy spring and the Easter holidays approaching quickly anything else than the beginning of a reduction in the slaughter would come as a surprise. Hide weights are moving up and down, but these should also start their regular descent now.

What do we expect? The market is certainly on firm ground. Prices have gradually increased around the globe and sellers left Hong Kong in an optimistic mood. But, not everything is so good. Extra heavy bull hides –as we have mentioned before – are accumulating, because demand from the auto tanners is declining. So, we expect the market to be steady with a firm undertone for most standard grades and we are waiting for extra heavy hides across Europe to sort themselves out. In the medium term one has to watch out as summer is approaching - as is the case every year.

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