What happened this week: The seasonal slow pace of the summer continues and the history of the past three to four weeks is repeating itself. There has not been much business activity and again the question is whether this is because only a few offers are circulating or if tanners do not have such an appetite for hides. While in Europe we are now in the peak holiday season and tanners do not seem bothered about hide purchasing during their vacation, the Asian buyers are still sitting on the fence and watching to see if anything reasonable is offered that they could buy still for August or September shipment. This is creating little physical activity, but a lot of rumours. People who are available are talking and traders are particularly forthcoming with stories about the market. Some have even reported receiving bids which we would consider to be well above the present market levels and we fail to see what the intentions of spreading this kind of news around are or if some tanners are still short of hides for August/September and are now trying to find material with new suppliers teasing them with attractive price levels. Basically, pretty unlikely.

Business was also concluded during this week. There were isolated sales into Europe to tanners who are already back from their vacation and smaller lots with some regular buyers into the Orient. There is quite a reasonable amount of interest for male hides in the weight range between 20-30 kg which confirms the decent situation in the shoe leather business. Interest is also coming out of the Eastern block where the low kill is also limiting the supply for the local tanning industry. Meanwhile, one can sense the growing concern within the tanning industry regarding profitability. Most tanners are desperately searching around the globe for raw materials that would fit into their calculations, while the tanning industry’s attempts to raise leather prices is at least at this stage of the season not proving successful.

Buyers are still not willing to spend any more money for certain raw materials and this was displayed by the immediate absence when attempts to lift asking prices were made this week. One can hardly be surprised. It has to be assumed that most tanners are at least covered for the immediate future and with the increasing global instability one cannot be blamed for managing business with great care in case there are not decent profits offered – and this is not the case on the present price levels. Anyway, we are still in the middle of the summer break and so it is not much use finding too many explanations. One can also sense that the trade is actually longing for new and clear indications and consequently now start to eagerly await the end of the holiday season as well as the ACLE held in Shanghai at the beginning of September. The meeting in China and the trips around Asia will certainly offer the first glance at the preconditions for the rest of 2006.

The kill: Still too low and not really improving yet. It seems that there is simply not enough cattle to buy combined with complete withdrawal of the consumer from the beef market. Exports are also lagging and this is resulting in what could be called the minimum possible and it doesn’t seem that there is going to be a lot of change in the near future.

What do we expect: The holidays have passed half-time and tanners are now returning week by week starting from the north of the continent. So, the next round of domestic negotiations is due pretty soon. There is still enough demand in the market to clear small productions at least until the end of September and this is going to maintain the market. We see little opportunity on the upside either after this week’s experience. So, another week without movement.