Extracts from the SauerReport

Although the economy is said to be strong in Germany and in Europe in general it does not seem to benefit the leather sector. Retail sales of leather upholstered furniture and other leather items is not good.

Car sales in Germany have dropped by 30%. Automotive leather tanneries are going slow because of reduced demand and hide prices are expected to stay soft for a while.

Exports to Asia were killed by the Chinese import complications and the low dollar. Italy is closing down for holidays.

For Portuguese hides, prices at abattoirs came down and there was much resistance from the abattoirs to sell at the new levels imposed by the market. Some abattoirs decided not to sell and are currently salting the hides expecting to sell at higher prices in the next round.

The local industry is slowing down, but still buying. Contrary to other years the kill is quite low for the season and there are not too many hides in the warehouses.

Raw hide prices in Spain have dropped by up to 7% and are still dropping. It is said that there are also sales done in private at prices we shall never know. But this does not mean that shoemakers are concluding new orders. Some tanners are working only low qualities. Work on the top grains has practically stopped.

Doubleface remains extremely difficult. Main customer Türkiye is said to have 50% less orders than last year! For lamb nappa there is very strong demand from China and South America for low grades for shoe lining. But stocks of this material all over the world have gone by now.

It is clear that in Eastern Europe prices show no tendency to come down. It is said there is plenty of work for the tanneries both for the home market and for export while the kills are low here too.

Contrary to what we see in many countries, the market in Iran is going up. Reasons are the good business with India and Pakistan in low grade pickled sheepskins. The Chinese have now also appeared on the market which made the raw prices jump.

The price of raw sheepskin in the Central Slaughterhouse of Tehran is now US$5-6 which means an increase of about 15% over the past two months. At the same slaughterhouse raw hide prices increased to US$1.50-1.70kg green for the m/f hides and US$1-1.30 for h/f hides.

Despite the lower slaughter levels in Brazil the raw hide price has not increased at all. Packers are finding it difficult to meet their weekly killing goals. However, traders don't see room for increases in hide prices since the dollar continues to lose ground to the real.

Tanners have dropped wet-blue prices by some 5% from the peak in the first semester but it is thought to be just a temporary condition. A number of them see prices rebounding in September as the world economy continues to perform well.

The hide market in Argentina has come down by 6-8% in all categories over the past 30 days and will probably weaken further following worldwide trends and given the forthcoming Northern Hemisphere vacation period.

The entire blurry picture on hide/leather imports tax regulations in China weighs heavy on price levels and leather/split demand in general, and will probably not be clear till Sept/Oct.

The Taiwan government stated that imports from China are negatively affecting the domestic industry and imposed a 43.46% anti-dumping duty on certain types of footwear imported from China. The new measures, which will remain in place until March 2012, will be applied retrospectively from March 16 when the ministry implemented provisional duties.

The duties apply to six categories of shoes including men's footwear, high heels, boots, children's shoes, sandals and casual footwear.

Chinese traders say we are watching a mini collapse of the US hide market. A few big players decided not to open L/Cs in due time, while others are trying to renegotiate existing contracts.

Tanners, and not only those in China, are also trying to find 'good' excuses to submit claims: too many light hides mixed in the deliveries, too many cuts or holes, deliveries not exactly 80/20 I/II, rotten grain, hairslip, too humid, etc etc.

The wet-blue split prices, especially the light weight ones, dropped substantially, making tanners use magnifying glasses to look into the cuts issue and try to obtain compensation from hides suppliers for the difference of US$3-5 in the wet-blue return when they resell them.

However, the US hide market has shown some signs of rallying when some bids were refused and some sellers even dared to ask for higher prices again. Maybe the bottom has been reached.

In East Africa there is a power battle going on at all abattoirs where local traders have to fight for their hides to contrast the steady conquest of the Jinja tannery from Uganda to buy all the hides in the region.

In spite of the weakness of other markets, East African hides remain firm. Goat and sheepskins remain firm and unchanged.

Raw hide prices are going up in Sudan. There are many buyers for every hide in raw, pickled and in wet-blue and there are not enough hides since the kill is down.

There was almost no activity in cow hides in Kenya. The tanners wanted to drop the prices thinking that the absence of the exporters of raw hides will push the raw suppliers to bring the prices down.

However, the raw suppliers decided to hold the stocks and the tanners are not getting the material. Still there are a few selected buyers in Asia who are prepared to pay top prices and the duty on top as well. Syrian interest pushed the prices for dry hides higher again.

Nigerian prices are still inflated by the country's export expansion grant which comes to 30% of the invoice value. With this in mind people want to produce more, invoice more and thus cash more of the grant.

Business in Nigeria has always been influenced by this kind of political measure and never was a simple matter of buying raw skins, tanning and selling them. Traders feel prices should come down to world market levels but for the moment we still don't see this happening.

The grant system does not really work either since exporters are still waiting for their 2006 grants to be paid back to them. And if the business was concluded at the time with money borrowed from the bank at 18% interest there won't be that much left of the 30% even if one does receive it.

Another complication is that it is an export expansion grant which means people must show that their exports increase every time. This is often hard to achieve.

In spite of all the difficulties in Nigeria there remains a strong demand and a good market for the top qualities in crust or suede and at very good prices. The volume of top qualities is rather limited, however, and the problem is often to sell the qualities below that which come in far bigger numbers.

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