This week finally showed a clear market movement again with sufficient activity to derive certain conclusions and a basis for price development. On the one hand, it became very clear during the week that many tanneries in Europe have already significantly reduced their production and, if necessary, will either plan further restrictions until the beginning of the new year, or end the year at the low level. This has so far been partly offset by the reduced kill and on the other hand by activities of traders and producers of semi-finished products, so that it had not yet come to the expected price pressure for raw material. On the other hand, inventories in the tanneries are beginning to increase steadily and it is becoming also clearer by the day that hopes for the usual and seasonal recovery in leather demand may be dashed this winter. So far, many problems have still been masked by the rather good business in better ranges and the significantly improved revenues for lime split. Both effects have meant that the tanneries have mostly been able to cope with the strain on liquidity over the past six months without any problems, but in the meantime there are no signs of improved demand for the medium and lower ranges of leather. It can therefore be assumed that a further increase in inventories in these ranges will hardly be avoided in the coming months. For this reason, the opportunity of the Christmas break will be used and, in addition, an already reduced soaking level

in order not to let the stocks grow considerably further at the end of the year. Even if in the last weeks the prices for gas and fuel oil fell again somewhat, the Damocles sword of the energy prices and the energy costs for the winter remains still very present. Consumers are clearly holding back on new purchases, and hopes for a very active and successful Christmas season are also dwindling by the day. In China, Covid continues to spread, leading to new lockdowns. Where it does not directly affects leather production, however, there it affects supply chains and logistics. As much as the weaker USD helps with import prices for energy, it weighs on export revenues for exports, and the same is true for cattle hides. Business-wise this week, the last delivery programs were made for the rest of the year. If one wanted to secure the purchase quantities for male goods for the coming weeks with his regular buyers, price reductions of 5-10% were necessary, depending on the type and weight.  Cows suffer to a lesser extend, but they were cheaper already and how the currency and the situation in China is going affect the market was not yet fully clear this week. For the moment, for those who care, quantity goes before price and taking into account the reduced production in the coming weeks and then the Christmas break, the decision is either to accept the possibilities or keep the merchandise for 2023.

The kill

The kill is now pointing upwards for the next few weeks. After the long period of waiting, higher slaughter volumes are now announced and we expect about 10-20% higher numbers in the coming weeks. This is not yet visible in the beef sales, but the fattening cattle are available and have to follow their cycle in one way or another. In the next few weeks, significantly colder temperatures are expected and this should then also be reflected in the kill and meat consumption.

What do we expect

Now the negotiations at the slaughterhouses for the purchase prices are pending. It will be seen how strongly the tendency to orient oneself to the facts play their role. The costs of collection and processing have risen massively at all levels. The demand volume and prices for standard leather and hides have not. Now, one can certainly always hope that a magician will appear and conjure the problem away, but that has never worked to date. European hides will always find their market because of their quality – only you have to be competitively priced, which is why people prefer them. Whoever ignores this and waits for the good fairy will probably have to be patient for a while, because even our hides do not only consist of top quality products.