Market Report 17.05.2024

What happened this week

At the moment, we are more concerned with the prices at the abattoirs and less with the situation on the sales markets. For those in this world who only have to market the by-product of meat production and do not have to worry about cost prices, this is of course irrelevant and their focus is therefore exclusively on what happens to prices with the leather industry. For those who still act as independent intermediaries on all by-products between the beef and other industries, the situation is certainly much more complicated. The situation on the sales markets is relatively clear and easy to describe. In northern China, people have switched to spring/summer mode, which is so often the same. ‘Suddenly’ they realise that there are not enough leather orders, that customers are not buying enough leather and that cash flow is becoming a problem. Much of this will be true even this year, but the question always remains as to what was not already clearly recognisable a month or two ago when you were still actively buying. If doubts were expressed due to the situation on the property markets, weak consumer demand for furniture and other leather goods, they were either not commented on at all or simply ignored. Nobody wants to bring problems into their home, but a certain degree of realism is helpful when it comes to price trends and market assessments, and it is advisable to look beyond the day-to-day. Now, even foresight doesn’t change the market situation, but it would probably smooth out price developments somewhat and help the flow of goods. As things stand now, history is repeating itself. The excessive stocks in Hebei not only have to be sold, which is not so easy at this time of year. The volume pressure also leads to price pressure on leather prices and thus the stocks and the value have to be reduced for the next season. So, all the usual levers are now being pulled to push down prices, which can be seen not only in the low bids for cowhides. The situation in China is unlikely to change in the near future, which is why the focus is shifting back to alternative markets. The market for bull hides in Europe also remains difficult. The major suppliers are using every means at their disposal to defend prices and recently there has even been talk of asking price increases. The balance of power is different for just-in-time deliveries of chilled goods in Europe. Whilst suppliers have a stronger position in price negotiations than overseas, the volume discussion remains and it is unlikely that the reduced production of the leather industry has absorbed or can absorb the increased kill of the first quarter. This means that goods will probably be channelled into other channels such as semi-finished products. The description of the market situation for the week is relatively simple. Few sales with price pressure from overseas and a standstill in Europe because the results of the slaughterhouses’ new prices need to be secured first. Overall, it can only be stated that the ‘official’ prices have only reflected a small proportion of sales for some time, do not reflect the actual volumes and the price range of all sales to all the various markets is wider than ever before.

The kill

No news from the kill. All producers are complaining that the supply of livestock is too low and prices for live cattle too high, although it is not clear whether more beef could be sold at all. Next Monday is another public holiday, so volumes will be reduced once again. All in all, the situation remains completely normal for the time of year.

What do we expect

What expectations should we have? Demand for leather is weak in most sectors and the few that are doing better are nowhere near enough to compensate for this. Better hides have it easier than poorer ones, but they have to be priced in line with the market, which the slaughter industry is massively resisting. In the end, however, the market will decide everything and where and when the prices for the summer will level off will depend on whether a realistic valuation can be agreed. European hides are always possible to sell, you just have to know what value they have in relation to other origins and options what seems to be unknown to many.