Market Report 27.10.2023

What happened this week

The markets have continued to calm down noticeably and the information situation for weekly reports actually remains quite unproductive. The big wave of interest from China has been dying down for a few weeks now, without actually having gone completely to sleep again. However, customers have again very clear ideas about what they want to buy and very precise ideas about what they want to pay for it. The main interest continues to focus on heavier cowhides that allow for both the production of higher thicknesses and still a satisfactory return for splits. Perhaps colleagues are more successful, but we are seeing growing resistance in price negotiations. Higher prices have not been a basis for discussion for a fortnight now and we have to deal more and more with lower price bids. As in the last few weeks, there is always very little left in the net at the end of the week from the great interest and the diverse enquiries at the beginning. It is enough for female hides to keep trading for another week, but the interest from China is no longer really convincing. In Europe, business continues to drag on. Slowly, the new negotiations for November deliveries are starting and in many cases they are already trying to cover the time until Christmas with the corresponding contracts. Most are aware that the prices they find now will probably last until the Christmas break. This is also what makes the discussions so difficult, because basically, with these deals, the basis for the prices will probably already be laid into January. Who would want to be wrong for such a long period then? At the end of the year, political and strategic considerations also play a role in price setting. For many companies, the end of the calendar year is also their balance sheet date and this means that both the level and the valuation of stocks play a significant role. One increasingly gets the impression that for many companies the most important thing at the moment is to put the correlations of the balance sheet structure on a sound footing. Rising interest rates will also be a parameter to consider for one or the other in the meantime. Basically, we still believe that in Europe price was important, but is not a real stimulant for the demand for hides. We do not have the impression that many decisions have already been made so far. In Europe, after all, almost everything continues to revolve around prices for the male and heavy product. Where there are already results, prices are down, the extent depending on what previous basis you start from.

The kill

Weather conditions are now in line with the season. Kills, on the other hand, are neither exceptionally low nor exceptionally high. Peak numbers are only expected in the next 4-6 weeks anyway, but at the moment there is no major pressure from any side. So, the numbers are at normal levels and the weights continue to rise slowly due to the season.

What do we expect

There are many theories already about how the market will develop in the coming year. Opinions vary widely. However, it will be difficult to find a positive scenario for the coming months. For sales to Asia, the Chinese New Year and the corresponding interruption are already slowly beginning to come into awareness. Thus, the best option would be if prices for female goods can still hold at the current level for a longer period of time. With the price level for male goods still in place, we honestly cannot think of how the production of hides can be completely placed in the leather industry in the coming weeks. Most male hides are still too expensive to be really an attractive alternative on the overseas markets. The volume plans up to the Christmas holidays of the tanners here in Europe do not allow us to assume at the moment that the demand can actually cover the accumulation of hides. However, since the pricing of some large market participants has not been aligned with market equilibrium for some time now, this does not mean that the corresponding and necessary price corrections will necessarily take place with it.