What happened this week: Basically one could scratch these weeks where the carnival season and the Chinese New Year holidays meet.

The kill is down, customers are either busy on holiday or — at least in some regions — are out on the streets celebrating the carnival season. Those who are left have time to sort out their shipments and administration or make plans for whatever they need to. Trading remains quiet.

The European fresh hide business is dealing with the effects of the low kill while little has changed for salted material. The US$ continues to yo-yo and, if there was anything positive this week, then it is the expectation of the next sharp recovery of the US currency. A rise in the US currency could absorb any hides with the Chinese players taking a real break for their holidays this year.

The grim stories are still coming out of southern Europe where one can hardly find anyone who is not depressed about the situation. Not only that but there is still little light at the end of tunnel as far as leather orders are concerned, and the financial situation also remains completely unclear. Despite all of the rumours about bankruptcies, so far very little has actually materialized, and anyone who isn't actually personally involved in specific cases no longer knows who is paying and who is not. At least one has to assume that a decent amount of payments are not coming in on time at the moment.

To get a grip on the leather market at the moment is also difficult. Apart from a few key, niche players it seems that leather orders are not what they should be at this time of the year and, at least as far as Europe is concerned, there is not much time left for a real and valuable upswing in orders to come. So, all the focus and potential for good news remains in the Middle and Far East, which is also not easy to judge these days.

The Chinese government is getting tough on environmental issues these days and more and more tanning areas are facing restrictions on the disposal of wastewater. It doesn’t seem that tanners can build or find alternatives quickly enough so as not to damage total production numbers. The key question remains whether there is still hope for a fundamental (non-currency related) recovery in the bovine market in the near future. Well, the only chance could be the reduced kill which we are seeing in a number of markets around the globe. If tanners (those with orders that can honour their invoices) are still a bit short-bought it could well happen.

With the continued brisk demand for sheep and goat at present it also seems that quite a bit of the leather demand has shifted to skins and with the ongoing drama in the split market they still don’t seem needed as a substitute. There are still some who believe that the bear cycle that we’ve seen since last May has run long enough now and think it is time for a change, if one has the courage. But from today’s perspective it might still be a bit early to consider this for the entire market.

The kill: With half of the country out on the streets and more going for beer rather than beef consumption, the kill remained low. There should be a bit more activity next week. We are curious to see if the EU blockade on Brazilian beef might help the local kill in the near future.  

What do we expect: In the coming weeks the market will have to decide on its direction. Will the poor state of the industry take the upper hand or will the optimists who think that the lower supply will eventually have an effect and start to support the market grade by grade win through? Question: What is going to happen to tanners when they have to pay for the hides? We believe that only an extended rally of the US$ could ease the pressure on the market — at least in our regions.

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