Osterhorn, Friday, 08.04.2022
The US $ in EURO 1,0870

What happened this week

It is very difficult in these times to find a clear view of the market situation in our commodity sector. The external influences on prices and the behaviour of market participants are too strong. On the one hand, of course, the war in Ukraine remains a major and determining issue and, on the other hand, the current development of the pandemic in China is of course having an ever greater influence. Thus, looking at the pure balance of supply and demand in the current situation is only of very limited value. Some sectors in the leather industry have very good order books, but are not able to execute them in full due to logistics and other supply problems. This is especially true in the automotive sector, where new information on production planning is published almost daily. Stop and go is now the daily standard here and this makes it extremely difficult for all parties in the supply chain. The situation in China is also starting to put a noticeable strain on the situation. On the one hand, the restrictions due to the government’s restrictive measures are now having an impact in all regions and sectors and go far beyond the Shanghai region, which is in the focus of attention. On the other hand, it must also be noted that shipments of hides from the USA are now increasing significantly in volume. This raises the question of whether, on the one hand, the goods are actually still needed in this quantity and, what is certainly even more important, whether the ships and containers can be unloaded quickly and at the planned port when they reach China in a few weeks. Since all this is very uncertain, planning for the leather factories is extremely difficult. Besides the question of whether the raw material will arrive on time for the planned production, the issue of financing is also being discussed more and more frequently. Factories that are short of finance are

already suffering extremely from limited deliveries and the resulting late payments from their customers. For their part, many shoe manufacturers in China are complaining about a significant drop in demand, as not only brick-and-mortar retailers but also online retailers are complaining about noticeable declines in ordering activity. As we are already at the beginning of April, the time factor for the current season is also gaining weight almost daily. In the meantime, export customers are trying to reduce their dependence on China quickly and significantly. This can already be seen in some cases in the redirected different flows of raw goods to other countries. Nevertheless, in the international supply chain it takes quite some time until these changes are actually successfully completed. In Europe, we continue to feel the situation as relatively paralysed. Here, too, there is a great deal of planning uncertainty, which, in addition to the questions regarding production, is already linked to the possible consequences of rapidly rising inflation. How much money will the consumer either still have available or be willing to spend on leather products in the second half of the year? It is possible that by then they will already be preoccupied with completely different problems. As a result, business this week again tended to concentrate on random individual transactions and within Europe people are waiting very anxiously for the coming prices at the slaughterhouses for the month of April. As a result, sales and price again remained at a rather reduced level with females showing price declines and only the new closings of the current programmes will provide a little more stimulation again.

The kill

The kill increased and this certainly has to do with Easter. Supermarkets traditionally replenish their stocks with higher quality cuts of meat and expect the corresponding increase in sales in the shops in the coming week. The prices for live cattle are certainly also very attractive for the farmers, so that perhaps one or the other is also inclined to take advantage of these opportunities now and hedge the prices for the time being.

What do we expect