Market Report 10.11.2023

What happened this week

A normal week in many respects came to an end. Not only were production and deliveries not interrupted by a public holiday, but most leather factories in Europe also worked through a normal production week again. However, working full days does not mean that full production capacity is being utilised. In many, if not possibly all cases, tanneries in Europe are no longer running at 100%. This would be less significant if we were not looking at the calendar, which is normally now in the phase where leather production is running at full speed. Under these conditions, it is easy to understand why the activities for raw materials are also dragging on. We are increasingly getting the impression that customers have already finalised their plans for the end of the year. The likelihood that they will shorten the Christmas break again seems more than remote at the moment. The order situation in the leather industry in Europe simply won’t improve. As a result, our focus remained more on the negotiations for prices at the abattoirs. Prices fell, but nowhere near as much as one would expect given the current situation and the very likely future development. Why the correction was so small and is still being postponed remains a mystery to market participants or may better, for us. Momentum is also slowing considerably in Asia, particularly in China. However, this is not all that surprising, as the months of September and October were ultimately characterised by constant and regular sales opportunities and the tanners in Asia have certainly replenished their stocks significantly. It can be assumed that they are now waiting for the outcome of the online sales on 11 November and are of course already taking into account the Christmas break in Europe, the higher kills here and, of course, the Chinese New Year in their considerations and planning. In principle, it is likely that without speculative buying there will no longer be a large demand window before the New Year in China. If orders for finished leather are below expectations, stocks could easily last until the holidays. Sales this week are again limited to rather random deals. Here and there, there were still opportunities to sell individual deliveries without any major interest in larger volumes and programmes. In Europe these were mostly male hides and in Asia cows remain the commodity of choice. The selling prices are crumbling somewhat and the asking prices are almost impossible to realise.

The kill

Slaughter figures remain relatively unspectacular. Without the public holidays, a normal weekly level has been reached again, but the big seasonal increase still fails to materialise. This only raises the question of whether postponed could possibly mean cancelled. In principle, this is rather unlikely, as the cattle that are ready for slaughter must be removed at some point. Within the next four weeks, we should and should have clarity as to whether there will be another significant surge in meat production and demand.

What do we expect

We cannot offer more than boring information for the next few weeks either. Prices are very unlikely to change much and if they do, the direction will continue to point downwards. The demand for leather is not really recovering and where it may be possible to conclude larger volumes, considerable price pressure from buyers is dictating this. Even if some try to paint a different picture, we remain convinced that the market is still a long way from equilibrium and this includes certainly also the semi-finished section.