Market Report 20.10.2023

What happened this week

There is hardly any need to talk about the general political problems and the geopolitical risks. Anyone who follows the daily news knows how dangerous the situation has become. Autocrats with a following that has little or nothing to lose are a dangerous combination that can hardly be controlled. Nor is it a good basis for business in hides and skins. In the days when leather was still an important material and hides and skins thus also an important basic material, crises were always a sure guarantee that prices would rise. In the meantime, the changes of the last decades have had exactly the opposite effect. Leather also plays only a very minor role in the equipment of the military and, as little as one might wish, the current armament does not help demand to any significant extent. In all other sectors in which leather is used, the problems on this planet are leading to increasing caution and, for the consumption where it is not absolutely necessary, to restraint and declines. The situation was not particularly favourable even before the wars, but with the increasing conflicts and the threat that they could spread, it is getting worse. One of the main problems to contend with at the moment is the absolute uncertainty and lack of clarity being conveyed by customers. Everyone is complaining about alleged delays in shipments of leather orders by customers. Everyone is complaining about alleged delays in shipments of leather orders by customers for leather and at the same time about hardly any reliable information about future demand. Supposedly, our digital world should lead to faster and better information and at the same time make supply chains more and more transparent. To be honest, we can’t feel any of that at the moment and one has much more the impression that the quality of the information is now much worse than it ever was in the past. From our point of view, this is also one of the main reasons why there is a lot of imbalance in the dispositions along the chain. The saying: If you put garbage in the top, manure will come out the bottom has never been as valid as it is today. Business this week was again rather sporadic. One thing is for sure, higher asking prices are not very successful at the moment. So, in the end, the only decision left was whether to accept the few bids for cowhides from China or not. There were no great opportunities for negotiation and so the quantities were limited and the prices were at best at the same level as a fortnight ago. In Europe, the new negotiations will only start in the next few weeks. Prices are of course always in focus, but the much bigger issue at the moment is probably still demand, the take-up of existing leather contracts and the business outlook for the coming months. There are not very many positive signals from the tanners on this.

The kill

Autumn has come quickly now and one has the feeling that it has simply changed from summer to ‘autumn/winter’. Cool, windy and rainy and this is usually the start of the increasing kill. The volumes are slowly increasing and the main reason is probably still quite good business in beef export. So, we are assuming the usual development at this time of year in the next few weeks.

What do we expect

We can’t see anything at the moment that could significantly lift sentiment and demand in the next few weeks. A quick end to the conflict in the Middle East would certainly help, but there are too many other trouble spots around the world. We are now slowly entering the phase of the Christmas business and, at least in Europe, people will be watching very closely to see whether this will help to reduce stocks in the retail sector. This is another important condition for the situation to improve. For the hide market in the coming weeks, we see more risk than support without expecting big price variations.