What happened this week: In Europe the market is loaded with emotions at present and is divided into two clear sections.

These high emotions are being created by the rumours and uncertainties about the situation in Italy. The little, if any, official news about the situation related to VAT fraud is leaving plenty of room for gossip and speculation which is circulating freely within the trade. Names, numbers, consequences, everything is being thrown around and has created an environment of fear which always leaves plenty of room for price volatility.

As far as the trading situation was concerned it seems fair to say that most of the trade has decided to shut their doors and disappear for the time being as we could not trace much activity, and most of the tanners south of the Alps have decided to retire from the market for now. This resulted in almost zero business being conducted in Italy this week which had to be compensated by other regions. It was also perfect timing for the players in the south, because the holiday on Thursday in the Catholic parts of Europe opened up the possibility for a shutdown on Friday and made it a very short week.

Our regular readers will remember that last week we were wondering whether some of the interest that had vanished would reappear this week. Well, part of it did, but it was mainly related to dairy cows and, unfortunately, not heifer and lighter dairy steer types which many had had high hopes for. Anyway, at present one should be happy with the level of trading that is taking place and at the end of the day we were not unhappy with the sheer number of hides sold, however, we were certainly not happy with the distribution over the grades and articles.

The weak US$ was another burden and with hardly any signs of a turnaround being seen in the declining trend, very little business can be compensated for by the currency market these days.

So, the bad news is the situation in Italy, the currency markets and the unbalanced sales record, but the good news is that the market hasn’t come to a complete standstill and there are still a number of tanners operating under ‘business as usual’ conditions who, rather than complaining about their order situation, are taking advantage of the adjusted raw material prices. The biggest problem in the market today, however, is the wide spread of opinions and prices between origins and suppliers and the rumours, stories and large price variations being thrown around, none of which are doing much to boost tanners’ confidence in the situation — at least not in Europe. Furthermore, the current turbulence in the financial markets and the rapid rise of oil prices are not supporting positive opinions about the immediate future much either.

This is where psychology comes into play and emotions start to feed themselves, although we still think that we are far from anything that could be called a crisis. In our opinion we are just going through a phase of correcting the stupid price rises that we were complaining about at the end of 2006 and going into 2007, and adapting to the currency movement and restructuring process in the European leather industry. The market is just taking back what it had given earlier and we are still far from finding ourselves in a real and substantial crisis – so far. The real slap in the face will come if higher food and energy prices finally hit consumption in the emerging markets too.  

The kill: Nothing was seen that could be called an autumn kill. Numbers are just about steady and no major increase was seen despite the long and warm Indian summer which then quickly turned into a wet and cold autumn. So, the supply side is not causing any additional trouble.

What do we expect: We feel that the market trend at present is no longer related to the situation in the hide market and is being driven more by the financial markets, currency situation and the news coming out of Italy. For the time being one can’t expect too much positive news from any of them. This should keep the market under pressure for a while without there being any fundamental or real reason.

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