What happened this week: The market continues to settle. For the time being it seems that the correction phase has come to an end and the price structure between grades, weights and origins is slowly but surely coming into order again. Although most places across the world have been in holiday mode this week and general activity was slow, sales did not come to a complete stop and demand remained intact. The first half of the week was very quiet but from Wednesday onwards business slowly gained momentum. The strong statistical export figures released in the USA on Thursday revealed that even bulls and ox/heifers were attracting more interest from Asia again.

However, most of the inquiries were for dairy cows and low grades again and, with the $ leaving record levels, it was certainly easier to find price agreements this week than in the previous week. The price variations in the past weeks have been so minimal that they are hardly worth mentioning. Nevertheless, with the general economic mood still being positive around the globe, some of the concerns about the future of the hide market have slowly faded. Most players gained confidence again as they have been able to move the vast majority of production in recent weeks. Consequently, the risk level has substantially fallen again and few people are actually burdened by substantial inventories. The general consensus is that very limited market movements are to be expected for the near- or medium-term future. Tanners are probably not too happy about this as they were hoping for more of a correction into the summer to help their margins and to have a better base for the new season starting after the summer.

From a European standpoint, it is difficult to imagine any trigger in the coming weeks that would cause more than the normal micro fluctuations. So the market direction will be driven much more by the overseas markets where things do not appear as clear cut as in Europe. Or maybe it will simply down to the currency markets which presently have almost as much influence on price movements as the market itself, which is currently more or less balanced and not strong enough to generate any major movements. While sellers count on insufficient stocks in the tanneries, combined with steady leather demand, buyers are using the argument of economics as to why the market should move their way. These opposing positions seem to counter each other as the market fundamentals of supply and demand also do. Everything is pointing to the idea that the next key movements will be triggered with the start of the production cycle in Asia somewhere in the next four to six weeks, which will also reveal the realities of the tanners’ stock and their risk analysis regarding raw material prices in the second quarter.

The kill: It has not been much fun with the holiday on Tuesday, reducing the week by more than just a day. What is of more concern, however, is the drop in weights which always hits calculations and eats into the regular supply of fresh material. In the end it is just another repetitive cyclical May/June situation which will be forgotten about later in year again.

What do we expect: Without any ‘exogenous shocks’ we believe that the market has found a pretty solid base again and that the price variations are seriously diminishing. We do not foresee any major changes. From the supply side, everybody is relaxed and so only a wave of purchasing interest would disturb the market balance at the moment. Even if this wave occurred it is questionable whether this would actually push prices higher with the resistance seen.