What happened this week: it AGAIN seems that we are swimming against the tide with our opinion. During the week a number of our colleges were busy talking the market better. Well, we found no evidence to back up their arguments and have not heard any news in conversations we’ve had to make us change our minds as yet. The fact that a few more hides were sold here and there during the week is not enough to set a trend and, from the facts we have collected, we can’t see any reason to get excited.

So, as far as the week’s business was concerned, although we did have a few more enquiries, there was nothing really worth mentioning as the level in the weeks before had been on the very low side due to the holidays in Asia and the carnival season, and anything other than an improvement would have been a disappointment.

The usual interest on dairy cows and low grades was around again, but due to the falling US$ and bids which were below the last levels, there was no great excitement and even with the steady levels obtained in US$-terms, the returns in euros were squeezed due to the falling value of the American currency. In Europe, business was also limited to bits and pieces and wherever substantial interest was found, buyers were rigid on their price ideas, resulting in prices eroding a fraction rather than increasing. This is nothing special, but with buying prices not reflecting the present market situation it is not much fun either.

So, we had no reason to jazz the market up as others tried to this week and we will have to increase our efforts next week to try to understand their excitement. As we were never overly-depressed it could be that the extremes of our emotions are a little less pronounced. As we have stated before, the next two-to-three weeks will be e decisive for the market trends. A number of shows, including the GDS shoe fair in Düsseldorf, should eventually deliver more decisions about fashion trends and leather orders. Apart from the structural problems, the biggest complaints from tanners are the uncertainties about articles and colour instructions which have and still are preventing them from making purchasing decisions. As far Asia is concerned, some are trying to prepare for the Hong Kong fair, and the trips and business leading up to the show.

The period between the Chinese New year and the Hong Kong Leather show is traditionally pretty busy and most years the market has reached a climax just after the show, before entering the general spring/summer descent. With the market having been in correction, or in a bear trend, since last spring, it seems that a number of players consider the time to be ripe for a similar pattern in 2008, too. However, what is missing in the current scenario is a convincing indication that leather demand will be strong for the rest of the upholstery and the start of the side leather season. So far there is still more negative rather than positive news being heard and, until now at least, most tanners and manufacturers (in Europe) are talking shrinking rather than increasing order books.

Sales were a bit better this week all the way down the offer list, but we are still finding demand for salted male hides insufficient.

The kill: The kill has increased quite significantly and has finally balanced out the sharp declines of January. Hide weights continue to bounce up and down from week to week without any explanation. 

What do we expect: We would like to share others’ optimism, but we will maintain our fully neutral view until we have a clear indication that tanners need   to replenish inventory more aggressively. As we now move into March we think that more indications will appear in the weeks to come. We don’t see any chance for the market to move much unless it is triggered by something special.

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