Market Report 28.07.2023

What happened this week

All in all, a rather interesting week is coming to an end. That is not to be expected at this time of year. It is not that one should equate interesting with particularly successful, but the tortured boredom that has been dominating business for weeks was not to be found this week. However, this is mainly due to the situation in Asia, where there is now more of a revival than one might have expected a few weeks ago. In Europe, on the other hand, the holiday season is weighing heavily on the market situation and the underlying mood remains very pessimistic. As is perhaps the case in the economy as a whole, it is becoming increasingly apparent that Europe, and perhaps Germany in particular, is unable to send out any positive vibes at the moment. Actually, everyone is only enjoying themselves on holiday. In Asia, at least, a certain activity can be observed, which indicates that one cannot be quite as negative for the rest of the year as one actually feels in Europe at the moment. However, one has to make a distinction again in Europe. If you look at the half-year results of the luxury goods groups, you really have to be extremely impressed. Unfortunately, this is not spilling over into the other sectors. Otherwise, in all other sectors, such as the normal furniture industry, but also the car industry and parts of the shoe industry, they are more driven by problems than by ideas and optimism for the future. So, we are actually in a two-tier world. In order not to be misunderstood, one has to point out that it is not said that in Asia business is hot and customers are buying and paying higher prices. They fight for every cent and every deal is a long ordeal until it is finally booked. When it comes to prices, people are still not prepared to accept higher levels and if there is a premium at all, it is only marginal. Today, people almost look more at the transport costs and the currency situation than at the selling price. It seems that it will take some time before a new market trend can really stabilise them. Whether this will then actually and necessarily be higher remains to be hoped, but the situation is not quite convincing. It seems that the Chinese tanners are hoping for their government and for promises that the economy and private demand will be strongly supported in the near future in order to boost economic growth in China again. How far this will be reflected in the leather business is at least debatable. The volume of sales this week was just not that big in the end because the interest was mainly in lighter and cheaper skins. As soon as the price is increased by heavier weights, the demand and interest dwindles very quickly. So, in the end, the possibility of physical sales was rather limited in terms of quantity. In Europe, the situation is completely different. If one can still talk about deals at all, then they already concern the time after the holiday and there the general opinion of the customers is actually that the prices have to be lower. This has made it very difficult to come together, because one side, buyer or seller, then has to bear the risk regarding price changes until the end of August. The views on which direction the markets will take are still very divergent, but the main problem remains how the slaughter industry will behave. European hides can always be sold, as long as the price is right.

The kill

It is not really necessary to write about the development of slaughtering at the moment, because during the holiday season it is traditionally the case that both consumption and production are limited to a minimum. Only the catering trade takes its normal quantities because of the holiday season. Since many people want to go on long-distance trips again after the Corona season, the demand side is limited until mid-August anyway.

What do we expect

In the next few weeks, all eyes will continue to be on Asia and the big question will be whether higher prices can be implemented. In addition, further currency developments are important, as is the question of whether the US dollar has overcome its phase of weakness for the time being. Europe will not give us any impulses in the next few weeks, so the next 2-3 weeks will be decisive for the further direction until September.