Market Report 25.08.2023

What happened this week

Actually, we are in a very normal week before the end of the holidays and the Shanghai fair. The pandemic and the Russian invasion simply interrupted the normal rhythms of our business for a couple of years and now we have to get used to how things normally work in our industry again. However, this also means that the situation may be misinterpreted, both in recent months and now. While sellers are misinterpreting the return to ‘normality’ to mean that demand for hides and skins and leather will inevitably improve significantly towards winter, much of the leather industry is thinking the opposite. With the usual exceptions known to everyone, world demand for leather has been and may continue to fall. This is despite the fact that the overall supply remains almost the same, although it must be taken into account that not all cattle hides are being collected any more due to the low prices. A certain amount has also found its way into collagen and gelatine, and thus no longer pushes its way into leather production. No one can say exactly what this means for the near future, but without a sustained recovery in the general demand for leather, it will be difficult. For our hides, this is actually not a big problem. As they belong to the better qualities, there is and will always be a market for them. It is only a question of price. For the moment, in any case, the female ones have found a relatively safe and constant price level today. As long as there are no new and strong price influences from other markets, this is unlikely to change. If higher prices are demanded, the tanners have other alternatives as long as these do not change in price, there is no reason to lower the prices strongly. The situation is somewhat different with male goods, where, at least from our point of view, no really secure and economically justifiable price level has yet emerged. These hides are on a global basis simply too expensive to be really internationally attractive, even though one senses that in recent months there have been more and more experiments with the commodity in Asia. Knowing the hides and their results, there is a not inconsiderable risk that the expectations of what the results will be are simply too high. Business this week was extremely quiet and in the end the bottom line was again only purely random business for small quantities to China. The interest is simply not sustainable and across the entire customer base. Of course, the Chinese tanners are now also waiting for the visits of the overseas suppliers and for the result of the fair in Shanghai. However, one thing can already be said with certainty: the tanners in China do not have well-filled order books that would make it seem attractive for them to stock up for winter production at the current relatively low price level. Under these conditions, it is not surprising that prices have not changed much again and that at the moment it is less a problem of price than a problem of quantity in demand.

The kill

Regarding the kill, one can honestly save any comment moment. Production is still running at the low summer level and with the hot temperatures in large parts of the country there is no other or further impetus. The change, if there is one, will then not occur until mid-September at the earliest, when everyone is back from school holidays and presumably the weather will then slowly turn autumnal.

What do we expect

It is hardly particularly meaningful or convincing at the moment to make forecasts for the further development of prices and the market. The slaughter industry is dreaming of the great resurgence and the leather industry fears major capacity utilisation problems. Two worlds are clearly colliding at the moment. Nevertheless, the fair in Shanghai, for many the first trip to China after a long time, and the talks, will lead to a new picture and assessment of the market. Whatever it may look like. In any case, we do not feel and do not have great optimism and great expectations. Next weekend we will know more.