Market Report 03.11.2023

What happened this week

All in all, it was a fairly normal week. Due to the federal system, there were two public holidays that were celebrated one after the other in the different federal states and Wednesday was also a public holiday in many other European countries. Coupled with the possibility of a bridge day, this causes many problems in terms of processes, communication, planning and logistics. It had little impact on the market, even though many tanners naturally took the opportunity to close their production facilities for several days or even the whole week. This is further proof that the leather industry does not have sufficient orders for the most part. This is particularly remarkable because we are actually at the beginning of the peak production phase now. Asia was open throughout the week and anyone who wanted to was able to do business outside Europe during the public holidays. There were opportunities, but it has become noticeably quieter and, as everyone else is reporting, the bids are always USD 1-3.00 below the asking prices. People are also becoming more selective about the hides and the focus is increasingly on heavier, female goods. If the information about falling split prices is correct, then this actually means that buyers see a greater advantage in the ability to produce higher thicknesses than in the significantly better yields offered by the lighter hides. Price negotiations were very tough and even the prices that were paid in the end were only achievable in isolated cases and for the most popular categories. Discounts of USD 0.50/1.00 were the rule for all other categories and there was no real interest in very light cows. In Europe, discussions focused on the deals still open for the next few weeks and in some cases until the Christmas holidays. All options were played through in terms of the combination of volumes, duration of supply contracts and prices. The biggest problem remains the unsatisfactory demand for leather. Price negotiations are therefore complicated, but lower prices will probably not solve the problem of lower production volumes in the coming weeks. The higher kills have not yet triggered any massive pressure to act, but to be honest, alternative solutions, which can really only be salting or tanning, will probably have to be found in the next few weeks. As far as prices are concerned, this is currently still reflected in moderate discounts. First of all, the prices at the abattoirs have to be adjusted to market realities, which should be better orientated towards the leather demand of the future.

The kill

This week, kills were again affected by two public holidays. From next week onwards, regular production should then dominate the market until Christmas and produce the highest volumes of the year. The weather conditions are likely to influence the weekly production figures. The distribution across the different types will be interesting. The weights continue to rise slowly.

What do we expect

At the risk of repeating ourselves once again. The market for hides and skins is increasingly even more determined by demand. In our opinion, the theses about declining kills or a shortage of supply simply cannot be substantiated. In addition, there is still the unresolved question of what to do with the stocks that have already accumulated. Price is only partly the solution, as the male product is simply far too expensive by international standards and could actually displace other options that tanners have overseas. For the female product, which is currently priced reasonably in line with the global market, everyone will now be focussing on how the leather industry in China views the prospects for the period after the Chinese New Year. At this stage, it does not appear that the same level of activity as in recent weeks can be expected to continue. The weaker USD doesn’t help either.