Market Report 13.10.2023

What happened this week

Since Hamas’ attack on Israel, the world is again another place. Even if the region is not one of the central production sites of the leather industry, the effects on the overall markets, similar to Russia’s war of aggression on Ukraine, should not be underestimated. Even if the financial markets and the oil market have shown very little reaction so far, another trouble spot on this planet nevertheless has a negative psychological effect on the overall mood again. This was also very easily and quickly noticeable this week in the sale of hides. However, there was of course another component that should not be underestimated. After the relatively active and good business to China in the last weeks, there were probably many attempts to increase the prices for female hides. We, too, have made attempts in this direction. Which influence on the mood was greater can hardly be determined with certainty, but at least in our case the activity and interest decreased very strongly this week. One quickly gained the impression that after the very extensive purchases of the last weeks and months, the immediate appetite and demand are satisfied for the time being and that one therefore reacts to higher prices and of course also to the geopolitical situation by waiting. The question has long been whether the buyers from China are actually covered by existing leather orders or whether stockpiling for the winter season and taking advantage of relatively low hide prices are the real reason for the recent sales. From our point of view, there is a lot to be said for it, because there is really not much evidence of a growing and increasing demand for leather, for furniture, shoes or bags. And it would not be the first time that Chinese buyers were guided more by prices than by current demand. This theory would also be supported by the fact that further price increases are simply no longer feasible and the buyers then tend to retreat to a wait-and-see attitude. In our region, people are still busy setting the new prices at the slaughterhouses. Here, the prices for bull hides play a particularly decisive role, because the core business for this commodity, automotive leather, is stuttering considerably at the moment. Falling prices for lime splits and a completely unclear situation as to how the production of vehicles will continue in the next few months are also contributing to further and growing uncertainty. The fact that the goods are overvalued in an international comparison does not help in the current situation and a new, correspondingly lower price basis must and should be found. After a few weeks of very extensive and pleasing sales, this week was now a very quiet one with only a few and rather random trades, which was certainly also due to the new and additional war in the Middle East.

The kill

In the North of Germany the temperatures went down a bit, but it is still very warm for the time of year. The grass is still green and growing, a feeling of autumn has not yet set in and thus a really intense impulse on the kill is not yet noticeable. Nevertheless, the numbers are now increasing week by week and, as we all know, postponed is not abandoned. The hide weights, however, are already going up noticeably.

What do we expect

Nothing is as difficult as predicting the future. Under the current geopolitical tensions and uncertainties even more so. The situation is certainly not favourable for general consumer sentiment. It may be more true for some regions than others, but overall the feel-good factor is also very important for shopping behaviour. Perhaps even more so for the planning and assessment of companies than for consumers. Under these conditions, we can actually only expect a continuation of subdued demand next week as well.