Hydra leather is an item dropped by the Alchemical Hydra. It must be used on the piece of machinery just south-west of the large pool in Lithkren Vault (requiring Dragon Slayer II), along with a hammer, to be made into the ferocious gloves. This can be reversed by using the same machinery.
When the Hydra leather is inspected, the chatbox message states This leather looks pretty tough to work with... Maybe the dragonkin had a way.
When the gloves are created, the chatbox message states By feeding the tough to work leather through the machine, you manage to form a pair of gloves.
For an exhaustive list of all known sources for this item, see here
- Originally, the hydra leather was supposed to be a pair of broken ferocious gloves that would be taken to Erdan in the top floor of the Myths' Guild to repair for free.