Most players have already done their homework and everyone has done what had to be done for the year. There is little, if anything, to offer and consequently nothing left to negotiate and talk about. Fundamental interest remains intact and it is easy to see that many tanners are worrying about their raw material supply for the first half of 2007. The fact is, at least in Europe, that the slaughter is not going to increase and no buffers are available. With no sign of any slowdown in leather orders for the near future, everything is on a knife-edge. Buyers are desperately waiting for a chance to lower their raw material costs and wait eagerly for a surplus situation in the market as we saw recently for overweight bulls, but at the same time, any decline in slaughter would immediately create supply bottlenecks which could hardly be compensated by alternative origins, because most supply markets are in a similar situation.           

So, one can only hope that the Christmas break in Europe and the Lunar New Year holidays in Asia in February will slow production a bit, so that some of the immediate pressure can be lifted. For the moment we are seeing quite the reverse. While trading activity has calmed down, the shipping department is busier than ever because most clients are pushing hard for quick shipments, particularly from Asia and the Middle East. They want everything as soon as possible on the boat, either because their inventory is too low or so that they have the material before their seasonal shut down.

Prices for the small amount of trading during the week were completely steady and the moderate rise in the $ made a few bids attractive in the end. And so once again, everything that had been offered was sold in volumes hardly worth mentioning. Interest is across the board and in particular from overseas. European customers have obviously closed their books already and are busy winding down production or preparing for Christmas rather than bothering about the hide market anymore. If there is anything still worth mentioning it is that payments from all over are coming in more slowly. This is nothing serious and it does not apply to the AAA customers, but for the rest. Even L/Cs without discrepancies from China are being honoured later and later by the banks without giving any convincing excuses. Since we all know that banks in China act mainly in accordance with the customer, it can only be related to insufficient funds, in that banks are trying to reduce their exposure and risk. We do not have any great interest in testing the commercial reliability of Chinese banks when their client fails and they still have to honour outstanding L/Cs. All we can do is hope for the best.

The kill: The Christmas slaughter seems to be slowing down. The kill is slowly descending, although it is still not bad. This trend should continue and we should see reduced volumes until Friday. Some slaughterhouses are indicating that they will reopen as early as the 26th to ensure they have enough product for the end of the year, so even the last week of 2006 should still supply adequate numbers. 

What do we expect: The year is coming to an end and with the limited offer situation not much is going to happen. Even one of the Christmas holiday buying rounds from Asia wouldn’t change much because there are not many hides to discuss. So, we should see pretty much the same until 2007. Little activity with only small changes, if any, in prices. 

 

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