What happened this week: There was hardly anything else than everybody looking to Asia trying to figure out if the APLF would change anything in the market place. After the show had finished it seems, that there is a general consensus about the situation. The hide market is in reasonable shape, because leather business is quite good in the already many times quoted sections and tanners have to work down an well sized orderbook and do not expect any significant reduction in activity in the near future. At the same time many of the volume manufacturers dispose also of reasonable inventory or have bought good volumes of hides during the past weeks, so the sales activity in Hongkong was not pushing the market any higher. The first two days saw a very active fair with stands full, relaxed but engaged faces and everyone confirming that conversations were extremely concrete, clearly structured and valuable for the business and the future outlook. If interest was displayed for raw or semi-finished materials, it was mostly for lighter weights and/or better qualities. The European customer base attending was mainly searching cautiously for

additional availabilities of heavy weight bulls and/or steers as already seen over the past weeks. Having spoken to many collueges form European countries, everyone confirmes that the kill of heavy weight cattle has and will further decline for various reasons. However, mainly due to countries or EU decisions on the age of the farm and slaughter cattle. The trade as well as tanners will have to accept the trend seen for a while will most likely not anymore reverse. Disappointed were the hopes of sales of dairy cows to the Orient. Despite some sales well below calculation levels, because of long term relations no interest or change in the present situation could be found. For heavy weigths the situation still entirely different with Italy still surprisingly regularly following the market trend paying higher prices. We are not sure, but it seems to us however, that total volumes to that direction are also already starting to decline. This would not come as a surprise knowing that furniture buiness in Europe remains below expectations and the season now also starting its decent into the summer. The only thing what could support this market any futher is the falling slaughter also of heavy cows. Returning to

The impressions from Hongkong, we have to admit that we were deeply impressed by the quality progressed made by our customers in the whole of Asia starting from India and heading East. The quality argument for European tanners seems to fade away much quicker than we expected. The kill: No better news for the moment. Numbers and weights remain on the low side and do not please anyone. Butchers predict a further fall what would – considering the time of the year – not come as a surprise. What do we expect?  From all what we know we think that the period of constantly and rapidly rising prices is now coming to an end. The spreads have been closed and price resistance due to restricted leather prices will start to dominate discussions. The seasonal decline in productions will also play a role and higher kills expected in some regions will ease some of the supply pressures. This does not mean an immediate change next week but less pressure for the medium term. Heavy males will take longer to react while others might initiate the change. Price issues will after the supply issues – our opinion – now return back to the forefront, since better business has so far not really turned into better leather prices. So far, not big changes now.