Market Report 01.03.2024

What happened this week

There was little news from our perspective this week either. Why not? Well, for many tanners it is not a problem where and how much goods they have to procure. Hardly any company currently has the feeling that there could be a shortage of hides and suppliers. This can even be observed in Asia. Even though business there has been very steady in recent weeks and months for feminine and lighter goods, it is clear that there is a clear price barrier that cannot be discussed. Again, the situation is simple. If the price exceeds the magic barrier, people turn away because there are still plenty of other sources with which to substitute. And so everything stays the same. The reduced quantities required for ongoing production are covered by the traditional suppliers. Price negotiations are tough in Europe, but co-operative, and agreements are reached from month to month. Even if the rhythms are different in Asia, the situation is the same. If the regular and preferred supplier can deliver, you always see if you can save something and fight for every cent, but as long as the prices do not exceed a certain level, you come to an agreement. Nevertheless, we are increasingly getting the impression that even in Asia there is currently more and more reflection on what is actually not needed for production in the second quarter and how prices are expected to develop thereafter. At the moment, we hardly see anyone letting their decisions be influenced by the fear of having to buy no or more expensive goods. Of course, we are now entering the summer quarters and kills will tend to be lower, many weeks will be interrupted by public holidays and hide weights will fall, but what used to be more of a threat and challenge to planning does not seem to scare any customers today and many see it more as another opportunity to reduce production and output even further. For someone who has been around a little longer, the question is how far this can be taken, especially in Europe. All the rules of thumb for how low a tannery’s capacity utilisation can and should be in the long term without jeopardising its continued existence have long since been clearly undercut. This means that new experiences are constantly being made. Since the trade fair in Milan, however, there has been more and more talk about stocks and the growing need to clear semi-finished goods. Here, too, suppliers have a difficult time because there are no customers queuing up who absolutely need the goods. So the only way to lure buyers is through the price and the most adventurous stories are being told and everyone has heard a lower price. Business has been relatively quiet here this week. What might be for sale is not available and nobody wants what one would like to sell at reasonable prices. This meant that the potential for business remained small and was reduced to a few deals with regular customers. We accepted price reductions for male products and were able to defend the last prices for female products with tenacity.

The kill

Kills are changing very little. However, production is shifting more and more from male to female cattle. This is also no surprise at this time of year and this trend has been increasing for years. The slaughter industry is complaining about high livestock prices and a lack of supply, but the big question is whether more meat can be sold outside the ‘convenience and fast food’ sector at the moment. In any case, it does not appear that the situation will change in the coming weeks.

What do we expect

We are rapidly approaching the second quarter. What’s more, the trade fair in Hong Kong is just a few weeks away. This is usually the time when activity slowly declines – if that is still possible at all in Europe. Things are looking better in Asia, but everything there revolves around price and that is a major problem for many European hides. We therefore maintain that we urgently need an ‘overhaul’ of the price structure in Europe. If this is implemented at some point, the business will also recover significantly, because there is still plenty of use and interest for our hides worldwide.