All the positive signs for the Orient are being counteracted by the negative signs in Europe. It seems that the European tanning industry—particularly the upholstery section—is in another round of restructuring and is losing further ground globally. This has not been helped by the weaker $ which is down almost 8% compared with the first quarter of 2006. More and more finished leather and leather products from South America and Asia are flooding into Europe and taking away further domestic potential from the local industry, not to mention problems in the export markets. So, if the fundamentals do not change in the near future, further shrinkage in the production capacity across Europe seems to be inevitable.

Meanwhile, European tanners having been trying to take chances in the market this week on heavy and expensive hides. Knowing that this is still a field where competition from the Orient is limited, they have been aggressively testing how far their influence still reaches. In their attempts to return raw material prices to their desired levels, they were not afraid to bid low in order to gauge how desperate sellers were. Despite recent difficulties regarding extra heavy cows and bulls, we do not believe that sellers were willing to take what was offered, but it will be exciting to see how this local battle ends. This does not have a lot to do with the international situation, but it could be of some relevance for the domestic market. In the meantime, it also seems that the struggle has shifted away from bulls a little and more toward the extra heavy cows. In general, prices were almost steady in figures but, due to the weaker $ and the slow performance of the European market, revenues have been shaved incrementally.

The kill: Easter is starting to throw its shadows and the kill remains steady at low levels. Nevertheless, the weeks after next will be shortened by a day and this will be missed in the slaughter. After that we will be entering the low season of spring and summer.

What do we expect: Next week all eyes will be focused on APLF and, whether people are attending or not, everyone will be trying to figure out the market’s next move, which will depend entirely on the leather sales and prices and the retail budgets which may become available during the gathering in the Far East. With the present balance of the market it is unlikely that a huge amount will happen in terms of prices apart from the uncertain outlook for the European specialities in heavies. 

 

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