Market Report 06.09.2024

What happened this week

All eyes were on the trade fair in Shanghai this week. China is still both the largest producer market and one of the largest consumer markets for leather products. This fact means that not only the trade fair, but also travelling in China, is of particular importance. Many suppliers from all corners of the world therefore used the trade fair to visit their customers all over the country at the same time. Many of them came together in Shanghai and, as always on such occasions, there was a lot of talking and exchanging of ideas. The problem with such events is, of course, that the opinions and reports are always strongly coloured by personal interests. This was also the case this time, although there was hardly anyone who wanted to characterise the situation as unreservedly positive. Nobody can ignore the consumer restraint that has been felt all over the world for some time now. Individual trends are then added to this, such as the decline in the use of leather in many sectors and the depressed mood and demand for furniture leather in general due to the difficulties in the property sector. The Chinese government is now planning to cut interest rates significantly again because it is obvious that without a strengthening of domestic demand, the difficulties in the Chinese economy will continue to increase. None of this helps for the moment, but it is noticeable that the leather industry in China has now also realised that there will not simply be a general short-term recovery as in the past. In order to maintain production, despite high inventories, efforts are being made to buy the cheapest goods from which revenues can be realised as quickly as possible. This means that the focus is on cheap goods that allow the production of high thicknesses where possible, because on the one hand this is the market with the better returns for finished leather, but on the other hand it at least opens up the possibility of recovering some of the costs via the proceeds from splitting. There is also a clearly noticeable trend in China towards more veg leather. However, these developments can in no way compensate for the declines in the mass production of furniture and automotive leather. Except for those suppliers and their goods that can fulfil expectations in terms of strength and price, sales during the trips and the fair will probably have fallen short of wishes and expectations. This certainly applies to us and apart from a few isolated sales due to old business relationships, little has happened overall. This applies in particular to cowhides, which traditionally make up the majority of sales from our region to China. It is therefore very easy to summarise that the hope of a rapid and intensive turnaround of the market situation for the better could certainly not be fulfilled by the trade fair in Shanghai. The fundamental and structural problems of leather demand using the material remain. There was also no significant price movement. The goods that were bought moved very little in price and one could choose whether it should have been a very little less or a very little more, which the sellers reported. The market remains under pressure for European females, although the selling prices for the low volumes were not significantly changed either.

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