What happened this week: Market activity has stayed at reasonably low levels, but is driven more by supply than demand. This week we also saw a reasonable number of inquiries for the standard grades with shipping requests within the next four to six weeks. This can hardly be met as most of these grades are already well covered and the low kill is not generating any additional quantities for sale. This situation applies mainly for the Asian markets and the grades between 20-35 kg. Once again there was less activity in Europe.

The top names are running at good levels and are only complaining about insufficient margins while the more standard tanneries have obviously slowed down due to a lack of orders and profitability, particularly in the upholstery segment. More and more complaints are also being expressed about the weakening $ which is hitting a large sector of the industry as a result of the large number of leather and leather products exported. We are getting closer to the long time lows of $1.36 against the € and this will certainly affect the hide and leather market. So long as the other raw material markets were rising in relation to the $’s descent it had very limited effect on prices, but since the US market has not advanced much recently, the cap on € prices can be sensed and, consequently, every cent the € gains has to be absorbed in prices. However, it seems this is only affecting a limited number of suppliers because, at the abattoir door, hardly any of these changes can be felt and some are still willing to bet on the market’s driving supply forces and obviously expect rising prices in the future.

Prices and sales were again steady on low levels with small declines towards the end of the week due to the falling $. Demand continues to focus on light bulls, ox/heifers, dairy cows and low grades and so again on the commodity items. The specialties and in particular the higher price and quality items seem to be struggling more and more and are also experiencing increasing price resistance, even from their European customer base which had been performing well due to the demand from the premium quality market. With the lower level market activity it is time for rumours, gossip and stories again and almost every day there are accounts of closures, take-overs, market movements, etc. Most of this is simply old news being filtered through new channels as fundamentally there is little news.

Upholstery is suffering most from the present hide prices and the market composition of finished articles, and their prices are not finding a reflection in most raw materials. Due to the strong performance of the global economy, shoes are still doing much better and, because of the reduced spread of prices for the selection, are also easier to calculate for the tanners. Little has changed again this week and there is still no clear direction for the market. 

The kill: The kill remains entirely steady. January slaughter statistics showed a 4.3% decline compared with 2006 and we would not be surprised if the decline for February was even higher. The 7.6% decline for cows was impressive while the 2.3% reduction for bulls was less than expected. Warm weather may allow the cattle out into the fields earlier this year which will not be positive news for the short-term kill.

What do we expect: The coming week will most likely be dominated by the expectation prior to APLF. For Europe we expect the market to be weak/steady for the next week and, without a strong move from the Orient or a sharp rebound of the $, this could last for a while without any strong moves due to the restricted supply situation.

Share this story: