Market Report 16.08.2024

What happened this week

Yesterday’s public holiday marked the end of the first half of August. Starting next week, one or two leather factories in Europe will slowly resume production, but at least some of the administration will return to the offices. It is difficult to imagine that there will be many new developments and it is therefore unlikely that the already familiar market situation will change very much. Unfortunately, we are already hearing in many places that the furniture industry, at least, does not yet see any silver linings on the horizon of demand for the rest of the year. Volume forecasts are very reluctant to be made, but basically everyone is reporting that volumes for the rest of the year are expected to be significantly lower than last year in some cases. Anyone who follows the media closely can hear and read that the European automotive industry, right up to the luxury segment, cannot expect particularly positive times either. Weak sales in China are also affecting expensive models, which are still preferably equipped with leather. Consumer sentiment in China remains very depressed overall and only in the USA does consumption at least appear to be stabilising. With our raw material, we are actually always 9-12 months ahead of the cycle in the consumer goods industry. So, if a recovery in consumer goods demand is really on the horizon, we should definitely receive signals in the next three months. At the moment, and especially in mid-August, it is of course still far too early for this, but the signs remain rather negative. Time is also running out for business with Asia. If the leather factories in Asia had a need for raw materials and were generally positive about the future, they should have returned to the market by now. Prices are low and anyone with a positive outlook for the future would normally have to start securing cheap raw materials. However, it seems that many have too much and too expensive raw material in stock and the courage to reduce the value of the stock through new purchases does not seem to be great enough yet. This certainly also has something to do with the fact that they think they can wait for the trade fair in Shanghai in peace, because all suppliers will have returned from their holidays and, according to the buyers, should feel the pressure to sell, so that they could then have a somewhat easier time in negotiations. However, it is also true that purchases in Shanghai are unlikely to arrive in Asia before November, which means that the need for procurement cannot be particularly great at the moment. Business was again very quiet this week. The prices that are being indexed from Asia do not leave a lot of options open. Ideas are so low that you can actually wait for the trade fair in Shanghai, because even then they won’t be much lower. In Europe, there were one or two deals to bridge the first few weeks after the end of the holidays and prices were moderately lower than before the holidays for the small quantities. However, these are probably just transitional transactions and not a real market reflection before we have a clear picture of volumes and price trends in the second half of September.