What happened this week: Believe it or not, we are nearly half way through 2015. In the hides and skins trade a lot has changed since the beginning of the year and we are back to trading conditions many thought would never come back.

Skin and split prices dropped in 2014 and bovine hides followed suit after the first quarter of this year. We are trying to figure out how long and how deep the cyclical trends of prices will go. This depends on the balance between supply and demand, and market psychology. Whether we like it or not, it does not look too positive - neither the demand from tanneries nor expectations about business are creating optimism for a quick turnaround of prices.

In addition, we are at the beginning of the summer season and, for the moment, leather has lost its market share. In Europe we had positive impacts protecting prices: one was currency and the other the steady production in automotive sector.

However, the currency buffer has gone and that leaves automotive, where the decline in demand and the decline in heavy hide production are compensating each other. Although automotive is important for European leather production, it is still an isolated sector.

European hides are not particularly competitive anymore and in some cases they look quite expensive. It seems that not everyone has realised this, and with several people still holding contracts for shipment and delivery in the coming weeks, the real need for price adjustments has not reached everyone.

Most people hope they can moderately guide the market through the summer to avoid any major corrections until the tanning industry resumes full production after the summer break.

This might be wishful thinking, and wishing is not the best tool in the hides and skins markets. The market is in search of a new level to balance supply and demand and this has not yet been found. Summer is always a tricky period to find a level, because leather demand for the coming seasons is unclear. The biggest issue might be to make the market understand that the spread between quality and commodity seems to have widened further.

Trading this week was a reflection of the above. Sales of good quality and heavy hides could still be achieved at more or less steady money, but only because of the decline in slaughter, which made it necessary to fill some production gaps.
Asia and the more standard markets and products were very quiet with the exception of some low-grade material. For the rest it was less an issue of price but rather of interest and little business was concluded. It was also difficult to figure out what the potential price level for standard items like dairy cows were this week. 

The kill: Butchers are very unhappy with their beef business and this means the kill is pretty low. We think this will be the situation until the end of August.

What we expect: From our perspective, the biggest problem is not really price, but demand. Price variations or corrections would not create much more interest in so much as major downward changes would not change much anyway.
However, for our region we have to watch the general valuation of our prices in regard to competing markets and this could create the need for certain adjustments – even if just for the sake of keeping regular business steady and not losing market share to other material options. 

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