What happened this week: Holidays! It is hard to find anyone who is not still, or already, on holiday and it is hard to find anyone at their desks. While in Europe most are either being grilled on the beach or climbing mountains and enjoying other recreational activities, those in China are excited about the opening of the Olympic Games and feverishly watched the fantastic opening ceremony on Friday.

This left little time and fewer contacts for carrying out business and, with the general problems in the leather sector, activity was at a very low level. This left space for the financial markets to hit the headlines and grab most of the attention. The US dollar gained a whopping 3,3 % from Wednesday to Friday and this is shifting the price balance between European hides and hides from the US dollar area a bit. However, much more importantly, the dollar has now left the 1.53 to 1.58 range and this is increasing the possibility of a new trend which could lift more pressure from the European market in the coming months. Oil prices are also falling further and this is also good news for the business as this could help to lower the problem of energy prices for the industry a bit.

We did not sense any interest for hides at all at the beginning of the week. With the depressing reports from the US market for cows and low grade material, the last potential buyers were walking away and so most of the interest was quickly withdrawn or prices indicated were far away from even the most pessimistic levels. At the end of the week, and with the help of the US dollar, some of the interest could be readdressed, and at least a minimal number of sales were completed.

The interest was again entirely focused on low grades, ox/heifers and bulls. Most buyers for dairy cows were again absent from the market and the few in the trade still available continue to discuss when the industry using dairy cows will return to the market and replenish their inventories. Despite all the malaise in this part of the trade, the global production of upholstery and garment leather hasn’t come to a standstill and volumes will certainly recover later in autumn. With all the problems in the manufacturing industry and the high stocks in the raw material market there is simply a lack of confidence and this is still preventing from any recovery yet.

The situation for male hides is different. Demand is steady and the declining kill has already had an impact. Some other European markets are already reporting factional increases in prices for bulls, but whether this is more than just a summer blip remains to be seen. We still think it is too early to become optimistic again and the market for males hasn’t been the major problem anyway.

The other bad news, a reflection of the situation in the European tanning market, has been the insolvency of a medium-sized German vegetable tanner. What makes it even worse is that he was supplying customers from the higher end of the quality range. This does not offer much hope for the industry’s cash flow situation for the period after the summer holidays; let’s hope it does not get too bad.

The kill: The kill remains at normal, lower summer levels. With the school holidays beginning to draw to an end in the first of Germany’s federal states, we can expect moderate rises in production from mid-August onwards.

What we expect: In the coming weeks, we have to expect things to remain more or less the same. China is now experiencing Olympic fever and it will take a while for all the European tanners to return and (hopefully) restart production. We believe that a lot will now depend on developments in Georgia, and even more on the US dollar to gauge whether more confidence will return and whether the trade situation will eventually improve.

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