First of all, we would like to wish all our readers and business friends a healthy, happy and successful New Year! Even though it has probably already happened a million times by the turn of the year, we of course also wish that the pandemic will finally lose its horror and that what we have known as ‘normal life’ will slowly but surely return. As expected, the past week was not very eventful. For a variety of reasons, businesses were either still on holiday, or used the start of the new year to observe the situation before getting carried away with new decisions. In the end, everything revolves around the pandemic again. The number of infections is rising around the globe. Even if the courses are obviously milder, illness or the resulting quarantine affect not only economic activity, but also the security of planning and, last but not least, of course, the entire global logistics. The big unknown is, of course, China, where ‘zero Covid’ still applies and thus even a few cases lead to far-reaching closures. The Olympic Games and Chinese New Year therefore also have an extensive impact. In terms of business, ‘a quiet start to the year’ would probably be a hopeless understatement. In Europe there was actually no interest at all in talking about sales and from Asia we received the usual enquiries about the weekly offer lists, but there was no real interest to be taken seriously.

All in all, we have had to assume for many weeks that sales to China are rather strategic in quality at the moment. The considerable shipping delays, especially from the USA, obviously ensure that goods are secured on all continents regardless of whether they are actually needed in the end. The considerable delays in shipping ultimately open up any possibility of cancelling deliveries if one realises that one does not need the goods. If there is any truth in this theory, then we have to assume that we are currently not seeing any real reflection of the actual supply and demand situation. This, of course, opens the door to any alternative for the market assessment beyond the next few weeks. Looking at leather demand, it remains very difficult to be very optimistic. Basically, we will soon be past the seasonal peak of production and there is still a relatively large amount of outstanding raw material shipments. In Europe, the slaughterhouses are trying to play the reduced supply card with the declining production. However, this is of relatively little help at the moment as volumes are still sufficient to meet demand. There have been relatively few deals this week and they are again limited to isolated chance deals. This will probably only return to normal in the coming weeks.

The kill

Beef production this week was even lower than it had already expected. In some cases the figures were up to 50 % below the level of mid-December. We don’t expect a very steep increase, but we do expect an increase and we should get back to normal volumes for this time of year in the next few weeks. These should then be -20-30 % below the fourth quarter peaks. Weights are heavy, but seasonally normal. However, falling short of the levels a year ago. The number of males in the slaughter mix is also well below average at this time of the year.

What do we expect

We stick to our assessment that a meaningful market situation can only emerge again from calendar week 3. The conflict between slaughterers’ expectations and the leather industry’s possibilities and planning seems to be intensifying again for the first months of the year. Nevertheless, we do not expect any major price swings in the short term, because the big triggers are missing. It seems that neither the beef industry in Europe nor the tanners need or can move their price targets at this moment, but as longer it lasts as closer we are getting to the next major trend setting move.