Market Report 08.12.2023

What happened this week

Every week it becomes more and more difficult to write something that could actually be described as a market report. To be honest, there are still some sales and turnover every week, but what we or what is generally referred to as a “market” doesn’t really exist at the moment. The activities and the number of players on the market and the volumes are simply too small at the moment. The main problem remains Europe, because the total demand for leather for manufacturing factories here has simply been far too small for a long time. The value chains, which require a consumer with both a sufficient budget and a pronounced awareness of quality due to the increased costs to match the necessary price levels, have simply shrunk in every respect. And that in two parameters. Firstly, the volume and, at the same time, the price pressure on leather is not abating. This mixture is and remains a toxic cocktail, and with lower volumes, the costs of production continue to rise. To compound the whole problem, the entire supply chain is struggling with ever more bureaucratic monsters, some of which are self-inflicted, but also largely due to the bureaucracies in the various European countries. A reversal of this trend can really not be recognised anywhere at the moment and this is also robbing the leather industry of more energy and creativity every day. Looking at federal law, we are working more and more like and for a public authority almost every day. Of course, there may be many explanations, justifications and excuses for this, but there are no solutions. The constraints imposed on the entire leather industry chain are simply not suited to the raw material and the product and have been having a paralysing and reinforcing effect for some time. This may be manageable for the cost leaders overseas, but for an industry in Europe that has to be flexible, fast and creative in order to pass on its increased costs in its products, it is poison. Whilst many may not want to admit it, this is the real and creeping threat we all face. To add a positive note, the retail trade has been very lucky with the early onset of winter. Winter shoes, gloves and, in some cases, doubleface jackets are selling extremely well at the moment and are at least helping to reduce the large stocks of previous years. This is really good news for the beleaguered retail sector and the situation. Business this week was again almost exclusively focussed on customers in Asia and it was only there that the odd sale was possible. It is also nothing new that this interest is limited exclusively to cow hides, occasionally also to heifers and low grades. In Europe, prices and the first deliveries after the Christmas break will now be discussed with regular customers and this will certainly not happen in the last few days before Christmas. Pricing will certainly be determined by the individual relationship between supplier and customer. Hardly anyone will be able to argue away the oversupply, especially of males, in the coming weeks.

The kill

There are no surprises in terms of the kill. The quantities are high and normal for the time of year. The catering trade and supermarkets are stocking up for the Christmas trade and the feedlots have to part with their animals. Fortunately, the surprisingly early and cold winter in our regions is encouraging meat consumption, so at least sales are fairly constant. The predictions of some market participants regarding lower kills this year have of course not materialised and the headline figures for Germany up to the end of October were almost unchanged compared to 2022.

What do we expect

As has often been mentioned here, prices are only reacting to the actual supply and demand ratio to a limited extent. The only thing that can really be deduced from this at the moment is that prices will certainly not rise in the coming weeks. However, we consider it unlikely that a more or less significant fall in prices will lead to any change in demand in the coming weeks. This certainly applies to Europe and therefore the only real impetus for the market will probably be limited to the behaviour of customers overseas.