Market Report 02.05.2025

What happened this week

Furthermore, it is relatively pointless to talk about ‘the market’, at least in the form in which we have understood it for decades or centuries. At the moment, we are in what would be described in current parlance as a disruptive phase. It is not the first time that prices for many raw materials as low and have no longer covered costs, but the fundamental conviction that this would be very temporary and that it is therefore only a matter of time before the leather factories return to the market has never really been questioned. This time too, when the markets eventually return to equilibrium, but the parameters and the time must be seen in a different light. In the foreseeable future, the leather industry alone will probably not be able to absorb and process the amount of raw materials due to a lack of demand for leather. This realisation probably did not require the US president’s tariff policy, but it works wonderfully as a fire accelerator. If there really is something to this thesis, then new costs and revenue chains must now be found once and for all, which will possibly change many certainties of the past. This has already been neglected in the case of sheepskins and lambskins, and now we will soon see whether it will be done better for cattle hides. We have a few thoughts, but if not everyone from the beginning to the end is re-thinking the supply chain and accepting operational changes it will be difficult or hardly be possible. Otherwise, the trading business here this week was probably no different to what we hear from other markets. Prices and flows of hides have to be completely reorganised and this has of course been triggered by the sudden arrival of hides from the USA on the markets, which were previously sold in China. Uncertainty leads to inactivity, which is why the existing agreements are being managed at the moment. Of course, the public holidays are also playing a role at the moment, as 1 May fell on Thursday, making it a long weekend, and in China people traditionally go on holiday for almost a week around 1 May. This means that the majority of market participants were and are not present at the moment. Apart from that, you can sense that more and more people are thinking about what the interrupted flow of goods between the USA and China could possibly mean for the rest of the world. It is not always possible or attractive to switch to other countries in South East Asia due to the tariffs. At the moment, there is still hope that China and the USA will be able to reach an agreement in the short term, which would quickly put an end to the spook. However, this is unlikely to happen and the damage that has already been done will probably be with us for a little longer in many respects. However, this also means that there are certainly business opportunities for those who can step in to fully replace the missing Chinese product supplies to the USA. Of course, this is not just about leather as a material, but also as a substitute for the manufacture of end products. Nothing has changed in terms of prices this week, which is not so much due to an active and balanced market, but simply due to a lack of activity coupled with a complete lack of clarity as to what impact the current situation will ultimately have on our markets. What is worrying here is the fact that there are quite a few people who regard the currently valid contract portfolio as a reference and are less concerned with the risks of the future.