Market Report 12.04.2024

What happened this week

What else can we say about the market? In addition to the general difficulties in the leather industry, we are also moving into the quieter phase of the two summer quarters. This all adds up to a very difficult environment for the raw materials market, which is not particularly new and therefore not surprising. The only thing that may be different is the fact that it is happening a little earlier this year than we are used to. Now this seems to be a rather isolated view, at least in our region, because if you look at the price negotiations and the behaviour of our colleagues in the purchasing department for raw materials and the pricing at the abattoirs, you have to have the impression that the majority of our competitors are fundamentally different. Contrary to our market assessment and our perceptions of the state of demand for rawhide, significantly higher prices were paid at the abattoirs for the month of April compared to March. This fact has to be accepted, but individual explanations for this behaviour are hard to find. However, the misbehaviour of individuals has little effect on the market as a whole, which only exacerbates the problems in the calculation and price negotiations with the tanners. In addition, in the overall market environment, it is hardly possible to explain why raw material prices should rise. The global market environment shows a similar situation and the eternal short-term enthusiasm at the trade fair in Hong Kong has once again turned into a very clear disillusionment two weeks later. Why many in Central Europe do not realise this will remain their secret. It cannot be repeated often enough: the global demand for leather is currently not sufficient to absorb the entire supply of raw materials and this is leading to squeezing out. This would actually be the least of the problems for European goods because we would always be able to displace other origins due to the quality. Well then, the next few weeks will be extremely complicated for negotiations and pricing. Sales this week were again somewhat depressed. While it was still possible to renew delivery programmes in Europe accepting the reflection of the new abattoir prices was impossible, customers in Asia were increasingly reluctant as the week progressed and if bids were not accepted immediately, further negotiations were usually unsuccessful and customers preferred to wait and see. The reason is simple, they expect lower prices. On the positive side, the development of the US dollar and the simultaneous further decline in freight rates should be mentioned.

The kill

The beef business also remains very difficult at the moment and is slowly starting to have an impact on kills. This is also not necessarily unusual for this time of year – production volumes will certainly be below average in the coming weeks. With the relatively warm temperatures grass is growing and cattle is returning to the meadows – where they are dry enough.

What do we expect

As you can certainly see from our comments above, we are not particularly positive about the near future and further market developments. Both prices for leather and volumes of orders are a major problem for the leather industry at the moment. This is always reflected sooner or later on the raw materials market and the time of year does not suggest that this will change in the short term. We therefore assume that it is not so much a question of if, but rather a question of when and by how much prices will react.