Market Report 04.10.2024

What happened this week

Last Friday, we were still completely convinced that this week would be a rather quiet and uneventful one. The public holidays in Asia and a public holiday in Germany led us to expect that little would happen in terms of both production and sales. Well, far from it and, as so often, things turned out quite differently. Two events completely shook up the market. On the one hand, of course, Iran’s missile attack on Israel and, on the other, the Chinese government’s decision to provide massive support for the Chinese economy and consumption. While the missile attack initially only had a psychological impact on business and for many only raised the question of what consequences a further escalation could possibly have in many areas, China’s decisions have a direct impact on business. Even if the decision has no direct influence on the consumer situation in China, the developments on the stock markets alone show how sensitively people are reacting to the situation and expectations in this large market. The consequences for our market were relatively clear. The mere possibility that the historically low price level could lead to an improvement in demand in the coming year meant that people were desperate to stock up even more on cheap raw materials. This meant that although an extremely large number of enquiries and interest were received, there was no sign of a positive trend in prices. Every trick in the book was used to secure raw materials at even more favourable prices. How successful this was in Europe is beyond our knowledge, but in our case we did not go for lower prices. We are by no means of the opinion that the fundamental problems and demand for leather have changed, but at the same time there is no reason to make a hasty decision without and before carefully analysing the facts. It was noticeable that people were either only interested in very low-priced goods (low qualities) or in switching from contracted goods to higher qualities. This means that they only see potential in extremely cheap hides, or they try to secure the low price level with better qualities and convince the supplier that they ‘only’ want to change the product type, but do not want to cancel their higher priced contract. At the end of the week, there wasn’t much left in the way of sales to Asia. For us, these strategies from Asia were only very rarely attractive, and the potential difficulties in the logistics of ocean shipping must also be taken into consideration. In Europe, we were able to extend some of our regular programmes and that was enough to secure the necessary flow of goods for the time being. Minor price reductions were necessary to ensure this.