What happened this week: As far as business was concerned, the past week could easily be skipped over. In the end, it demonstrated how heavily much of the trade continues to depend on greater China. Because of the New Year celebrations in China and in some other parts of Asia, the activity from that part of the world was very limited and, considering that the Chinese community is also deeply integrated in other countries in south-east Asia, the impact of the holiday was noticed almost everywhere.

Compared with the situation exactly a year ago, when tanners were still keeping up-to-date with the market even when they were on holiday and some only took a short production break, we can see just how different the situation is now. There were some that could not stay away even this year; however, it seemed there was more playing around than real interest in taking advantage of the present price levels. So from the few inquiries received from Asia during the week only very limited sales materialised. Inquiries that appeared to be serious in the beginning mainly ended without reply and most players seemed to be simply sniffing around. Consequently, the number of sales was very limited and rather coincidental.

Prices obtained were better again in Europe and the US dollar’s fluctuation during the week also helped here and there. Interest seen was mainly for male hides as the recent moderate strength in the US market shifted a bit of interest for bulls into Europe. More and more tanners are recognising the results from European hides in the meantime and the learning curve of how to handle them technically has also advanced further.

So, where European males had to be sold at a discount compared with their US counterparts a year ago, a certain market level has now been established. The fact that the seasonal influence in Europe is much less impactful than in the States may be helping a little here and some tanners are making the most of the opportunity to escape from the winter hides.

In Europe, we found the situation extremely quiet and hardly any interest was noted. In general, we can only repeat our comments from last week; that we are still facing the vicious cycle of insufficient orders mixed and amplified with the daily delivery of bad news and uncertainty about the future of business and financial security.

In this environment many are simply left paralysed. The most worrying thing is  that a large number of tanneries is only working at 70% or even less and it doesn’t take much brain power to work out how long European businesses can handle this considering the overheads and financial commitments many of them have. Since there is currently little sign of a short-term recovery, the future of the industry as a whole up to the summer does not look promising.

Even though cash-flow has been positively influenced by reduced soakings and lower material costs, it simply means time has been bought and problems postponed if production cannot be increased. As a result, some are even toying with the idea of increasing production in order to take advantage of reduced raw material prices and to use money by producing rather than financing unused machines and employing people to sit at home. Since nobody knows how long the market will take to recover, this involves a gamble in terms of financial resources, but it might end up being the cheaper option.

The kill: The kill is falling moderately and we expect this to continue over the weeks to come.

What we expect: We are hoping to see a bit more activity next week. However, it may still be a while before a clear picture about leather orders and business strategies for the coming months finally emerges. Prices should not vary much before then.

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