What happened this week: Finally again a week of mixed emotions. The world is presently again divided into two parts. While the first half of the year was the Asian/Chinese party which is presently – at least for European suppliers – ending in a decent hangover, the second half has become again a more European event again. And so is the situation today. Many of the European high and consistent quality tanners enjoy good business and orders. They are busy and so they need a steady and regular influx of raw materials. This applies in particular for the side and vegetable tanners. This is basically favouring the European raw hides of higher quality and this makes a number of suppliers quite happy with their business.  They are much less currency affected, because many of the finished products are also sold into the European market. This might cover 30-40 % of the total raw material production. The rest is struggling, because either it is more currency related with, f.e. standard furniture leathers produced for the global market or even directly dedicated to overseas markets which are calculating in USD only. This part of the raw material business is a

direct reflection of the currency market  and the end of the Chinese production festival 2004. As a result we saw this week a market development reflecting precisely the forecast. While male and quality hides were in good demand and decent volumes were moved at moderately reduced prices were females again under pressure. This is less reflected in a collapse of prices, but much more in insufficient sales and shipments. With the recent decline in prices more and more stories are heard about L/C delays or even contract cancellations from Asia and in particular from China. The business out there - tanners expectaions - has simply not materialized in the second half of 2004 and so many tanners find themselves overbought or figure out, that the raw material they have under contract doesn’t fit into the orders they have. With the higher seasonal kill in Europe this has, or is creating still a decent jam of product. Amplified is this situation by the inventory policy of many producers along the supply chain. Towards the end of the fiscal year, which is in many cases the end of the calendar year many are trying to reduce their stocks to the

minimum and this is pushed back through the pipeline and…. finishes with the raw material. So far the bad news. On the positive side some people in the trade realize, that the price level is attractive and some strong hands have appeared this week to find weak sellers to buy bargains clearly recognizable as speculative long positions. Means, that the outlook for the first quarter is not seen entirely negative.   The kill: Absolutely no change. The cow kill stays high and the males normal. With the extension of the budget year for the subsidies until the 31.03.05 the expected kill of males will be more stretched and the ‘wall of bulls’ will not come in an abnormal extend   What do we expect? Well, also the coming week will not be easy. The end of the year is getting closer and most people are already closing their books. However, we have the gut feeling that the market wave is eventually rolling out until the end of the year. The outcome of the final tests of the next BSE suspect in the US could have also an effect on the general spirit. Leather business has not stopped, just changed, and the global economy is still expanding. The market sentiment has a fair change for a settlement as we are back to the comfortable level of prices.