Extracts from the SauerReport

Tanners who have orders but no raw stocks have to pay the prices asked. Others who do have stocks and some space and time to wait for better times and lower prices do so. Although the second team forms the majority, the few in the first one seem enough to keep prices at level. This is no doubt because of the limited numbers of hides and skins available.

We are also beginning to feel the annual Hong Kong nervousness which means that an increasing number of players prefer to adopt the 'wait and see' attitude. Before Hong Kong we still have leather fairs in Milano/Italy this week and in Madrid/Spain next week, not forgetting the Chinese furniture fair in Guangzhou from March 18-21.

Although practically everybody in the trade agrees that leather fairs nowadays are just PR to say hello to customers and friends and no longer places where hide and skins business is done or where the market will change, the feeling and hope are always that it may still happen. Traders (especially the Americans) start collecting offers and buy to have goods for sale in Hong Kong.

This pushes prices up; then they travel to customers BEFORE the fair starts to try and sell BEFORE the fair opens. Most tanners visited before and during the fair decide they prefer to wait with their buying decisions until the fair is over. After the fair prices drop. Shall we see it again?

In my opinion, and I could be wrong, many of the recent and present Chinese hide purchases in the US could be based on the completion of still valid customs books to import tax free. The future regarding implementation of the new import rules and thus the exact import costs is still unsure and tanners may have decided to buy what they can while still possible, even if they do not really need the hides at this moment.

I continue to believe that no matter which way exactly the new import rules come to us, they will not be to the advantage of the Chinese tanning industry and will reduce the price of what tanners will be prepared to pay for raw imports (from the standpoint that they will not get sufficiently more for their finished leather to cover their extra costs).

This combined with the possibility of numbers of hides bought 'in advance' to make full use of the custom books which may keep these buyers out of the market for some time to come, could lead to reducing demand and prices sometime in the (near) future. Nonsense or plausible? You choose!

The new import regulations are starting to have their influence. Joint venture companies are looking to change their status in order to streamline their raw imports.

Although the hide market in the UK is described as stable we see quite a range of prices on the market. The problem of the health certificates is solved but nobody knows what will happen to a number of containers which left English ports for China without any certificate at all.

Earlier, hide shipments to China were blocked when the hide trade learned that Defra ( the UK Department for Environment, Food and Rural Affairs) had been negotiating a new health certificate with the Chinese authorities. The new certificate is effective as from April 1 and, most worryingly, neither the veterinary services nor the hide trade in the UK have been involved in the writing of the document.

In Bulgaria, the lamb season has started and the traders are buying the skins from the slaughterhouses. The sales side is still quiet but the trade counts on more interest from the Turkish tanners. Reason is that the Russian buyers in Türkiye are asking for lighter leather and the Bulgarian skins fit that request quite well.

In Türkiye there are less doubleface tanners than last year. Some are in serious trouble. Few have the financial capacity to diversify. The rest of western Europe also has less business. In short, the doubleface trade in the west is not exactly thriving! And this while the raw skins are cheaper than last year elsewhere in the world but more expensive in Spain!

China and Russia remain active in the Australian lambskin market and continue their interest provided prices do not increase. Demand from China for sheepskins remains concentrated on woolly skins with 1-2 in or more and that goes for all grades high or low. Prices are steady.

Good Spanish hides seem to be a little more expensive. Hide merchants say that if Spanish tanners are not prepared to pay more, other tanners abroad are. On the other hand tanners say that forced by their own customers, they have to sell their leather somewhat cheaper or lose the business. When one adds the new effluent costs (in Igualada) it is clear the situation is far from comfortable for them: hides costs more - tanning costs are higher - leather sales prices must be reduced. As a result, the margins - if any - are every day smaller or even non existent.

The only tanners who seem to be on the safe side are those who produce a lot of different leather types; from good quality grains to good quality splits.

The situation with the Spanish sheep and lambskin tanners seems to be a little worse than the cattle hides sector and no doubt we will see new tannery closures this year.

Most hide prices in Kenya, Uganda and other countries on the African continent have not changed but remain firm. In Tanzania there are no real changes either but we do note that the low end of the previously 'going price' range has increased while the high end did not move. As long as prices are no higher than those concluded the last time, business continues. Once a cent more is asked all interest disappears.

China and Pakistan remain the main buyers. News from Pakistan is confusing. While there are tanners who seem to be working well and buying raw material others speak of doom and misery and do nothing. Those who want to sell to Pakistan, have to find those lucky good ones. They do exist!

There are plans in Sudan to bring all tanneries together in a centralized area to combat environmental problems. At the moment, however, the leather industry in the country moves very slowly and more and more hides are being exported raw (to Egypt mainly). Goatskin prices look slightly easier while some sheepskin prices increased. This is a reverse of the trend of the last months!

Certain Brazilian prices (not with all exporters!) appear to be lower than they were before. Have these sellers realised that they had priced themselves out of the market and did they come back to the real world? As usual in Brazil everything remains utterly confusing and the exchange rate is the main factor to influence prices. On the domestic hide market the pressure continues to bring prices down.

There has been mixed news from the US car industry over the February sales figures. General Motors minus 2.5%; Ford minus 3%. Better results from Daimler Chrysler plus 3%. Toyota saw sales increase by 2.4% (but this is far below the expected 10%). Honda increased sales by 8.7%.

Automotive leather sales remain difficult since car manufacturers only want to pay less. This is understandable in view of their sales results but not good news for the leather industry. Fortunately the home furniture leather business is doing a lot better.

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