What happened this week: Any hope that the market or business would take a break following the Hong Kong show was in vain. Broad-based interest from Asia and Europe kept everyone busy and sales were as good as ever. This is extending the sold-forward position of the market and it would come as no surprise if most sellers are clear up until the end of May. The key question now on everyone’s lips is when the inventories will be filled up sufficiently so that tanners can dare to take a break in their purchasing activities. Under these types of market conditions it is pretty obvious that there are various different positions and desires. For obvious reasons, tanners would love to see raw material prices decline again, just as butchers would like to see them rising. Furthermore, ‘the trade’ is well separated into bulls and bears at the moment.

Short-term, the current situation, with a market that is firm and oversold, obviously suits the seller. Sales are easy, concerns are few and this is a good feeling to have after the long periods in 2004 and 2005 where fundamentally the buyer always had the upper hand in the market. However, there has never been a good outcome when market conditions overheat and are driven more by emotion rather than rational calculations. And this is the impression one is getting now from the current situation. We are certainly not denying that leather business has improved over the last six months, but the question remains, particularly in upholstery, as to how true a reflection of the real demand for finished products the present raw material activity is. Not to speak of the calculations, because the actual raw material prices certainly do not allow a solid and profitable calculation on most upholstery leathers.

It might still be a bit early in the year to take the heat out of the market, but there is no question that the seasonal slowdown in the leather industry can’t be too far away and the slightest change in the tone of the market could alter matters quickly. However, under the present circumstances a change in the trend will not happen overnight. It will take several weeks to build up pressure on sellers. Any instant effect could come only from the outside such as the financial markets. This week the US$ enjoyed another rollercoaster ride and a trading range of almost 2% in a week hasn’t been seen for some time. The US$ continues to remain within its established trading range, which is assisting calculations and has certainly acted as a safety net in the first quarter.

Sales during the week were—as mentioned above—quite active, again up to 40kg. Interest was seen across the board with some focus on dairy cows. Bulls and ox/heifers are also finding more and more regular takers in the Orient. Italian tanners also came onboard, but European tanners are much more cautious and reluctant over the raw material market at the moment. Prices were at asking levels and some offers were accepted, if they were not unreasonable, while attempts to lift the market significantly have remained unsuccessful up to now.

The kill: Steady at the beginning of the week, but slower towards the end. The weather still remains a factor, but the Easter break is going to shorten the killing week for the next two.

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