Market Report 16.02.2024

What happened this week

There are phases in the year when it is relatively pointless to think about the market or market activities. Last week and the current week definitely belong to them. The Chinese New Year and the carnival season in Europe, as well as the upcoming fair in Milan, repeatedly lead to a clear, temporary decline in market activity. Surprisingly, some agents and customers from China have also used the computer or mobile phone during the holidays to test whether it would be possible to conclude a favorable deal. There were some bids, but, as in previous weeks, they were significantly below the requested prices. It mainly concerned cows and low grades. The price continued to be more important than the quality of the goods, which is positive in one way, as at least part of the production has a secure market. However, this week we consciously did not respond to every offer, which resulted in no deals being concluded. The price difference was not extremely large, but there was hardly any room for negotiations. It was clearly visible that buyers were willing to buy at a certain price as a holiday deal, but not above. For other product groups, especially male hides, we could not detect any interest from Asia. There was also almost no business activity in Europe. This is less surprising, as on the one hand, there are no regular contract renewals pending, and on the other hand, the fair in Milan is being awaited next week. However, buyers are not worried that there could suddenly be a sudden increase in demand and they would have to make anticipated decisions. There are currently more and more reports that leather factories in Europe are reducing their workforce and production. Manufacturers of automotive leather are particularly affected at the moment, where some structural changes appear to be taking place. However, these are not positive news. The purchasing negotiations at the slaughterhouses were disappointing again. It is difficult to explain why it is not possible to lower male prices to an internationally attractive level. There were some minor discounts for male animals, but in our opinion, they are still far from what would be necessary to achieve a solid sales basis. It is clear that a certain quantity can be sold for regular deliveries, but for the entire production, we still doubt that there is a market in Europe. In Europe, tanneries say that there is no price problem but a sales problem. Customers overseas say exactly the opposite: they see less of a sales problem and more of a price problem for these hides.

The kill

There is little new to report on production as well. The kill remains relatively stable and are rather at the upper end of the usual for this time of year. The latest data for slaughters in 2023 show no change compared to 2022. All predictions for a significant decline were therefore wrong. The next livestock count in May will give us a better indicator for the numbers in the current year. We also do not expect any significant changes in production in the coming week.

What do we expect

Finally, next week the long-awaited fair in Milan will take place. The hopeful optimists expect positive impulses for leather demand. The fair in Milan provides insights into fashion trends and items, but it is not a real trend indicator for actual leather business. However, the personal meetings at the fair leave a significant psychological impression on the hide market. For the demand for raw material, the same picture may arise as at previous fairs. The enthusiastic expectation of the first morning gives way to reality and disillusionment at the latest on the afternoon of the second day. Of course, this does not apply to high-quality niches, but for the general business, this will probably come close to the truth again.