What happened this week: We have had a real summer this year! What started some weeks ago with some beautiful weather has lasted and has now turned into a real heat wave and has had consequences on the slaughter and hide production. The kill has been falling rapidly for the past two weeks and is continuing to do so.

Although nobody really knows what the average should be for this time of the year, it would definitely not be an exaggeration to state that we are roughly 30% below what one could expect. The consequences of this for the trade are obvious. As sales were pretty good in June and at the beginning of July, the supply is not currently enough to meet the existing interest and demand. For the first time in a long while, we had to ask for moderate shipping extensions, because the hide supply was so much lower than we had expected. Consequently the offer list is also pretty much barren.

The low kill will certainly not remain for ever but it seems that, with the school holidays and the continuing forecasts for warm weather conditions, the slaughter will not increase before mid-August or maybe even later. As the kill has dried up customers have also realised that the present limited supply will not allow lower bids to be accepted. Therefore, almost everyone is in a holiday mood and nobody is really looking for further business to be done anymore.

In Europe almost everybody is now on holiday or winding down production over the past few days. Fundamentally, customers from the Far East remain interested in purchasing further hides, but they are displaying their needs very carefully. They know being too aggressive will only lead to higher asking prices and will not create more hides to be bought.

Another strange factor this week is that only Europe appears to be enjoying a fundamentally positive market—assuming that the information and reports from other parts of the world are correct. As mentioned earlier, the only explanation for the present situation is that there is more interest for medium- and higher-end upholstery leathers rather than for the low-end of the quality range. How this fits with the complaints about ongoing pressure on finished leather prices remains to be seen later this year.

Despite all of the problems around the globe, higher energy prices and other factors that point to a slowdown in consumer trade later this year, most tanners’ order books seem to be reasonably well-filled and tanners want to have their raw material positions secured as much as they can. However, as mentioned above, it does not seem that this situation is as evenly spread across the hide producing world as it was probably six months ago. When hide prices for various qualities and origins drift so far apart this usually means that there will be a reaction, one way or the other.

Prices remained entirely steady again. The short-lived upturn of the US$ helped for a day, but we were quickly back to the levels we have seen for many weeks again and basically neither more money was achievable nor was it necessary to accept less money.

The kill: Everything to be said about the kill has already been said above. Record lows due to very hot weather conditions during the school holidays in our region. For the coming weeks there is very little hope that anything is going to change in this situation. Low weights, low kill. 

What do we expect: We think the next one or two weeks will be the quietest of the year, with no offers and not many buyers around. Any new trends for the market will most likely only be determined later in the summer and it might easily take another four to six weeks, at least until the leather fair in Shanghai, to obtain a clearer picture.

Share this story: