What happened this week: A good number of Europeans travelled to Shanghai this week, while most American visitors cancelled their trips. The attendance of the Fair was reasonable. Clearly recognizable was the fact that domestic Chinese business and mood is much less influenced by the terrorist attack than in Europe or the USA – and this is  good news.  On the other hand we heard from several companies in the Far East that US companies have cancelled or postponed orders for finished products – this is bad news. Towards the end of the event it became clear how much the exports to the USA mean in total volume for China  and a quick normalization is needed to prevent from further difficulties. Korea has re-opened the market for German hides what will spread its effect probably in about two weeks when the Koreans and Chinese return from their next weeks holidays. It will certainly restructure many of the price spreads between European dairy cows and various USA hide types. One can feel in the market that various players  have different positions and intentions what is making market judgments very difficult at present. In our case we still feel that short term supply is outstripping demand in most categories and price

pressures still persist. Atthe same time we don’t follow the ‘total depression’ gurus who expect a total collapse of business. With all caution, but the seasonal upswing in the next months in world demand of leather and a normalizing order situation with US retailers and importers over the next weeks, should lift some of the brakes for the productions in Asia and  things should level out again. This is certainly subject to a calm down in the political and military atmosphere. The biggest problem we see in normalizing the product flow again. In the pipeline you still find significant inventories at various stages. This does not apply in general, but hits individual companies. Their reactions are unpredictable as nobody knows if they have to or decide to liquidate. Only when this is resolved we can really return to normal. In the meantime we assume that another strongly determining factor should be a shift in demand in the leather segments. The leaders of the past years, such as auto, luxury items and top quality furniture may loose ground due to the slowdown in the USA while the others, predominantly shoe and garment could regain. In any case the price structure of hides and the spreads between high end and low end should  

narrow further. The kill:  The kill remains steady now. Missing export contracts limit beef sales and hold things back for the moment. Also weather is more favourable. What do we expect? Next week we have to fix abattoir prices in the North and in the South. They need a significant reduction, since we have at first to balance out the rises of September which haven’t been paid by the leather industry plus the market correction which we anticipate for the next weeks. The big disparity between markets is the major problem.  With prices having slumped in Ireland, and might be followed in the UK, we need to adjust on selling prices - if not already taken in the last weeks anyway - and substantially  in buying prices to bring things in order again and to make it possible for the trade to buffer an eventual short term oversupply in some grades. More importantly also to bring hides to security levels for the rest of the year. We think that a final  correction now is better than a remaining threat of reductions for the coming months.  This would neither help us nor the tanning industry in their efforts to stabilize orders and sales. If price structures between markets are sorted out again we are not pessimistic anymore for the rest of the year and the re-opening of the Korean market should also assist.