Market Report 15.03.2024

What happened this week

There is no question that the tension in the market is slowly increasing. This is particularly due to APFL, which takes place in Hong Kong next week. After a break of several years, the appeal of the fair is obviously still undiminished and the location of the transition in Dubai has obviously not been able to break it. The fair was never really a leather sales fair, but for many tanners it was more of a showcase and an opportunity to meet many customers from the Asian region – and global suppliers of course. The same applies to the raw materials sector, but for this sector the fair was even more valuable, because nowhere else did the raw materials producers come together in such a concentrated form as in Hong Kong and anyone who is interested in developments on other continents and markets will also make the journey to Hong Kong. In fact, everything else is the same as it has always been. Some suppliers have already set off to visit their customers. Every successful visit lifts the mood and the courage to try higher prices. That’s how it used to be and the truth always came out either on the last day of the fair or the week after. Apart from the fact that everyone tries to portray the mood in the way that best suits their own ideas, we tend to stick to a rather unemotional assessment of the market. It is undisputed that stocks of cheaper raw materials and leathers have been reduced along the supply chain and that the big players (have to) fill the pipeline again. However, this is all taking place at a low price level, which has been the case for some time. At the next higher price level, things look considerably more difficult. Now the providers don’t care about such subtleties and will try to underpin their negotiating position with the usual combination of stories and warnings about reduced supply. We will now see very quickly whether this tactic is successful, whether customers have to prioritise security of supply over price, or whether they already have sufficient stocks and can defend themselves accordingly. In any case, leather demand has benefited from lower prices, fashion and the need to offer consumers something new again. So far, however, this can only be said for the mass market and low-priced leathers. The week was rather quiet for us. There were courtesy visits and courtesy deals, but nothing spectacular. For big deals, we would have had to accept even lower prices. Interestingly, interest this week was more focussed on male goods. In the case of female goods, both price and quantity were still rather restrained.

The kill

There is still talk from some players of low kills. We are still unable to confirm this. The volumes are completely normal for the time of year and the statistics for January even show significantly higher figures than in 2023. This situation is unlikely to change much until Easter. Then the winter will slowly come to an end and the grazing cattle will return outside. We assume that this year will at the end not bring any major changes to the slaughter figures in total.

What do we expect

Next week, all eyes and ears will be on the trade fair in Hong Kong. It will be interesting to see whether anything has changed in Hong Kong. A lot has happened in the meantime. There will probably be a big ‘showdown’ between the hide suppliers and the tanners at the fair. After a long period of weakness in the market, the former will no doubt do everything they can to turn the trend around and make customers realise that the first purchase is the best purchase. The tanners will point to the low leather prices, reduced order levels and consider a price reversal to be impossible. So, here too, it’s business as usual. If it is business as usual, then Tuesday will start with great enthusiasm from sellers and by the end of the week normality may return. Things normally calm down quickly in the second quarter, but what is normal these days and there are still plenty of risks.