What happened this week: Our expectations for this week have proven quite accurate, with general business activity continuing to strengthen among low grades and dairy cows in particular. Asian as well as Italian buyers started to replenish their inventories and every purchase was conditioned by very short delivery terms. Whether this is a general trend or just a move of individual companies it is probably too early to say. The firmer trend in the US dollar has helped calculations and despite the fact that prices in Asia have not increased and will not do so, the revenues are starting to reach better levels if one compares abattoir to selling prices. Low grades have also found a lot of interest, confirming the existence of high price pressure on finished products that tanners are only able to meet by using cheaper raw materials. Early reports from the furniture fair in Cologne have so far brought no real news. High quality luxury items or very cheap models still prevail and hopes for the return of middle priced items to the market have been quashed. Yet there is a growing sense that a rising demand for top quality selections cannot be met by the raw material supply. This has already resulted in many tanners struggling to maintain the profitable top selection business as they fail to handle the increasing inventories of average selections. On the whole, there is no reason to be optimistic about furniture leather demand and prices. Most of the production capacities in Asia are still operating at less then 100% capacity whilst the trend of continuing price pressure remains strong. Unusual claims from Asia for last year’s shipments requesting compensation have also been recorded. This is yet another indication that the business of upholstery tanners is far from satisfactory and that they are trying to emphasise the problem. The situation in the side leather market continues to improve although the ‘low season’ atmosphere is felt widely. Lighter weight material, however, is still in adequate demand and will keep the interest provided prices remain within a certain frame. The only exception is the weight range between 5/12 kg where hardly any interest is sensed at all – it is truly intriguing that the tanning industry has neglected the product for almost twp years. Garment leathers are still in the doldrums with little activity and high price pressure. This is not only an issue with dairy cows but also affects lamb and sheepskins.
