Reflections on The Week

European Hide Markets Reach Confused Stage

Most elements of the European hide and skin complex became muddled this week as China disappeared for its Lunar New Year. Price ideas were all over the map with huge gaps between buyers and sellers in certain selections. By the end of trading today, it was generally believed that not as many hides sold as were produced.

The Italian market was a focal point of much of the discussion this week. A shortage of stocks continued to plague tanners in the Arzignano area, which is painful especially since their need for raw material no longer corresponds profitably with finished leather bookings from December. Most hide producers chose to raise their asking levels in unrealistic fashion, either in an effort to deter buying or to test just how high tanners might be willing to bid. This was mainly the case on cow hides, but was also seen in bulls. Certain categories of ox/heifers actually declined, especially in extra heavy weights.

Globally there was also a slower pace of hide trade in the absence of Asian buyers. We even heard that certain selections of bovine hides softened up in Australia and New Zealand. The North American market slowed way down, even if prices held to almost steady in light trading. The South American market seemed to have decent inquiry but buyers struggled with the elevated price structure.

The Le Cuir Show was held in Paris, France, from Wednesday through today.  Staking its reputation on the latest trends and edgy innovations, the show apparently delivered. Bad weather hampered transportation and attendance on Wednesday but, ultimately a greater number of countries were represented and a larger number of people came to this edition than even last year.

Part of the allure of the show, as usual, was the ongoing success in luxury markets, handbags and other leather accessories. This bode well for interest in corresponding high end veal skins and lamb skins used in making the top quality, cutting edge articles featured in Paris. However, raw materials trading was somewhat limited to these specialty items at the show. 

Next week shapes up to be another fairly quiet week. Buyers needing product will have to bargain creatively in order to cover their requirements or otherwise wait out the perplexing local supply situation. Most market participants in the European arena agree that the situation is tenuous at best and even dangerous on some level. The big puzzle  is how to anticipate the nature of the Chinese return to the market which, for most, will not occur until February 22.

Upcoming European Trade Show Events 

Le Cuir	Paris, France	Feb. 9-12
Styl & Kabo	Brno, Czech Republic	Feb. 14-18
Shoe, Leather, Fur	Kiev, Ukraine	Feb. 17-20
Moda Footwear	Birmingham, UK	Feb. 21-23
MICAM-Mipel	Milan, Italy	Mar. 2-5
Iberpiel/Modacalzado	Madrid, Spain	Mar. 11-13
GDS	Düsseldorf, Germany	Mar. 12-14
Lineapelle	Bologna, Italy	Mar. 16-18

This Week's Currency Corner: U.S. Dollar, Euro And Pound

	USD-EUR	EUR-GBP	USD-GBP
Friday, Feb. 5	1.361	1.148	1.561
Monday, Feb. 8	1.369	1.14?	1.565
Tuesday, Feb. 9	1.379	1.14?	1.568
Wednesday, Feb. 10	1.372	1.14?	1.560
Thursday, Feb. 11	1.364	1.14?	1.567

Industry News Bullets

France-Hermès One Of Rare Winners In 2009

French luxury house, Hèrmes reported an 8.5% increase in turnover in 2009, rising to EUR 1.914 billion thanks to good retail growth. The firm hinted that its net income would be slightly above that of 2008.

Switzerland- Chinese Issue Complaint To W.T.O On EU Tariffs

 In a statement issued by its mission in Geneva, where the WTO is based, the Chinese government said Europe's actions "violated various obligations under the W.T.O and consequently caused damage to the legitimate rights and interests of Chinese exporters. "It added that China "had repeatedly consulted" with the European Union but said that its concerns "had not been properly addressed or settled."

Italy- Delay In Release Of U.S. Weekly Export Figures

Due to massive snow storms in the Washington D.C. area, the Foreign Agricultural Service was not able to disseminate its usual weekly U.S. cattlehide export figures revealing sales to Europe and other destinations.

Germany- DyStar Deal Performed, Jobs Preserved

Insolvency administrators announced the completion of a transaction buying all but the Gerestried plant in DyStar’s German operations. Under new management of Kiri Dyes & Chemicals Ltd, the firm intends to save up to 750 related jobs in Germany at about 2,000 worldwide in the take over.

Raw Hide Markets Across Europe

UK, Irish Ox/Heifer Market Suddenly Sluggish

UK/Irish Report

Two developments were apparent in the UK and Irish ox/heifer hide market this week. For one, in the absence of the Chinese, who have been taking the lion’s share of UK 36 and ups over the last several months, UK dealers and exporters found little support for this biggest production item. The other noticeable happening (or lack thereof!) was a sharp drop off of interest for Irish 46 and ups.

The UK 36 and up situation is far from dire at this point since the English had tidied up their own forward sales positions before the Chinese departed on holiday. Sales of 36‘s as high as $72 and even $73 CNF main Chinese port were registered as recently as late last week. As a result there was mainly only a focus of liquidation and processing of older contracts taking place among dealers this week. We did hear that a small quantity of lighter weight UK material and a few barley bulls moved at fully steady prices during the last few days.

The Irish also report being well sold ahead on their standard 36 and up ox/heifers and did not push sales on them. However, as mentioned on the top of our report, interest during the last two weeks for extra heavies (46 and ups) appeared to drop off almost completely. This item, which had garnered considerable support up until the end of January, suddenly found itself in high production opposite sparse interest. As recently as 3 weeks ago, we heard asking prices approaching EUR 1.15 delivered Italy, while this week the asking level had reduced to between EUR 1.05 and 1.10 with bidding only in the mid .90 range among the Italians.

Forecast:  Whatever the issue is with the Irish 46’s, producers will need to negotiate hard with both their abattoirs as well as with their tanner-customers in the coming days and weeks as this weight category will likely be prominent in the slaughter mix in the near term and will have to be dealt with. Even UK dealers appear to be concerned about prospects down the road as they are expected to try to take their abattoir prices down by a good Pound Sterling next week.

European Cow Market: Out Of Control?

Female Hides Report

Click on chart to view underlying data.

For many the European cow hide market seems to have spiraled out of control. There was a large disparity between the escalating asking levels demanded by sellers and the reluctant bids being extended by tanners in most cases, resulting in only a modest volume of business for traditional western European selections.

Nonetheless, the cow market continued to swell on sentiment and fear, more so than on actual bookings. For example, bench mark North German 25 and up cow hides were offered for as high as EUR 1.24 and even 1.30 this week. Their customers, primarily in Italy, balked at these inflated notions, with few even willing to counter bid. The highest bid we heard was ‘only’ 1.15 NIT, which was rejected. Other tanner ideas were caught between 1.00-1.10, but this was simply wishful thinking.

French heavy cows were able to enjoy a spate of business into Tuscany this week, with their heavies (32 and up) selling at an impressive EUR 1.30 to vegetable tanners. They also report selling 32 and downs at EUR 1.35 to the almost captive niche market. Other doubting observers say these levels are hard to fathom. One party which sells croupons to the Santa Croce-Ponte Egola area said he perceived no open-to-buy among tanners either this week or last. In fact another French source said his market for heavies was EUR 1.15 to 1.20 with the larger butchers claiming 1.20 and 1.25.

The UK 26 and up cow market was asking in one instance EUR 1.10 and results unknown. Irish cows were said to have sold on a similar average at EUR 1.02 delivered NIT.

Other tanners admit that they could not eek out a profit on any of the above levels and chose to risk qualitative issues in the pursuit of Russian wet blue or cheaper offshore cows. The price and description of these goods is suspect at best, but some tanners are now reasoning that they have at least a chance to come out profitably with such material instead of being guaranteed a loss with more pedigree origins.

There were no reports of any sales to China or surrounding countries this week. Therefore, there was an absence of movement in northern European 24-25 kilo cows which had crossed over the $60 per hide CNF basis in late January.

Forecast: Perhaps tanners will try to blend the good with the not-so-good to work out their sales orders in finished leather, but this won’t be easy, either. It still seems apparent that many tanners, particularly in Italy, have fewer stocks of raw and wet blue to work with than they need. Since abattoirs from primary European sources seem intent on asking continually higher prices for their material, a disaster could be looming ahead. We don’t pretend to know what March will bring but do not expect lower cow prices in February!

Quality Veal Skins Featured In Paris

The Le Cuir Show was held in Paris from Wednesday until today. This event always focuses on high end goods and the skins that go into them. This year was no exception, helping pave the way for tip-top European skins to maintain their hefty price spreads over high production, medium quality skins of similar weight averages.

One French producer in attendance was pleased with immediate interest in the show, both in his best lamb skins and his specialty box calf for the luxury leathers exhibitors displayed in Paris. Deals were concluded on French high end selection 9-13 kilo green weight at EUR 3.70 and same description only 13-16 kilos at EUR 3.60 to their favored tanners.

Of course the above only represents a small portion of the overall veal skin complex in primary production areas of Europe. The medium quality gamut from France at 13 and up was pegged at EUR 3.00. Similarly, the Dutch 14.50 kilo market was put at EUR 2.90-2.95 with 16.50 kilos at about 10 cents less. Second tier productions were said to be lagging behind by another 20 cents or so, depending on particular descriptions.

The big lack, which already started to take away momentum in the veal skin market a couple of weeks ago, was the melting interest from China and Japan. The Italian market was almost completely dead again this week, as well. Inquiries from India were not as pronounced as had been indicated immediately after the leather show in Chennai two weeks ago.

Forecast: With the above having been said, the veal skin market is in a state of flux right now. As a slate of important leather shows unfolds over the next month or more, skin producers will be awaiting new seasonal leather orders. Until then, look for this market to be steady at best.

Bulls Remain Rock Solid

Male Hides Report

Click on chart to view underlying data.

The bull hide market subtly inched upward on moderate volume again this week. As has been the case for the last several weeks, dealers and producers let the market come to them, bumping asking prices up mainly along the order of 5-10 cents per kilo, refusing most bids that came up short. A few trucks were sold, mainly between traditional channels.

South German heavy bulls (40 and 50 kilos and up) were offered at EUR 1.53 and 1.54. Their last purported sales had been from 1.40 to 1.45. Initial bids were seen in the same areas as last sales and negotiations were under way as this report was being written. Similarly, North German 40 and up bull hides were shown at as high as EUR 1.40, or a good 15 cents or more above our last printed sale. However, we also heard they were being offered at between 1.30 and 1.35.  It is dubious that anything was concluded this week at near this basis. However, sellers were coy and disinterested in selling, not knowing what their own commitments may become at the abattoir level down the road. One producer allegedly offered 30-39 kilo bulls at the dizzying price of 1.60, with outcome being price shock with the customer(!)

There was a parcel of UK 36 and up barley bulls that sold at EUR 1.40 delivered Portugal.

On a comparative note, U.S.A fleshed heavy native steers moved in modest quantities again this week at the equivalent of $75 CNF China (or $68 fob plant), as it was rumored that the major automotive tanneries there had somewhat reduced their buying of raw hides during this week and last. Where as we did not hear that a similar buying reduction took place in European car seat tanneries, we did note that demand overall was a bit less than before.

Forecast: Bull hide production as a function of the slaughter mix was said to be continuing low for another week. This has been the case since the first of the year, which might be helping support outside sources beyond normal program hides. Where as we do not forecast lower prices anytime soon, we question if the bull hide price structure, which is now crossing into the historically high side of normal, will be able to extract much more out of the buyers by the time March rolls around.

Looking Ahead (Commentary)

Year Of The Tiger Requires Understanding

February 14 is just around the corner. For many in the west it means Valentine’s Day, that special day when we show our special partners how much we love them. However, this February 14 is a double bonus as it also happens to be the Chinese New Year. And for you Zodiacal neophytes, 2010 will be the Year of the Tiger.

First of all, don’t believe those who will tell you that “The Year of the Tiger” predicts the return of Tiger Woods to his wife and his golfing career. That’s the kind of superstition that belongs in tabloids. The REAL Year of the Tiger is found in the Chinese Horoscope and it might just have some predictive powers for our own careers in the hide and leather complex. Let me explain.

Understanding the personality of tiger people, according to my horoscopic study, is a study of contrasts. They tend to be tempestuous yet calm; warm-hearted yet fearsome; hard-working yet discouraged by temporary bouts with failure. It would appear that we westerners will have a hard time during the next 12 months anticipating if our Tiger trading partners will kiss us or kick us in our business dealings at any given time. However, if we make special efforts to remain calm and even tempered ourselves, this will help our ongoing concern with them.

In fact, part of the tiger personality is that they are capable of great love but are also emotional and may lash out in times of distress. This happened last winter when the market collapsed and hundreds of tiger bound-containers were canceled or contracts otherwise forgotten. Gratefully the tiger is also known to be resilient, often behaving more rationally once his confidence is restored. After the aforementioned brief episode of frustration with the market, virtually all tigers re-entered the marketplace to re-assert their friendships with their western friends. Their generous and possessive love prospered as they continued to buy from the west with great passion and zeal throughout the fall and well into winter.

The above is a classic manifestation of the tiger personality. The Zodiac says, and I quote, “If your friend was born in the year of the tiger, there will be highs and lows in your friendship, but the friendship itself will remain firm.” What the horoscope did NOT say, but what also appears to be consistent is this: As long as we in the west have plenty of raw hides to sell and enough money to buy finished products, our friendship, no matter how tenuous, will remain!

Craig Roalson (editor)

Hidenet.com

A Reminder to our Readers

All the price charts we print are intended to be used solely for a basis of helping illustrate trends in the market. The actual prices seen in them do not reflect qualitative variation from one origin to another. Hidenet.com recognizes that there is a variety of factors which determines different prices for similarly described merchandise.