Market Report 23.02.2024

What happened this week

The trade fair in Milan is over and anyone who still needed confirmation of the many theses and problems of the European leather industry will hardly have travelled home without having received it. First of all, it remains the case that the trade fair is still the most important in the world for its actual purpose. If you want to find out about the use of leather in the wider field of fashion, this is the place to be and if you want to find trends, articles and news, you will hardly find a better place for our sector. However, many people come to Italy to get a general impression of the situation in the leather industry. This is then reduced to personal meetings, because what does the industrial production of leather and leather products have to do with the trade fair in Milan? Nothing really, because that is not its original purpose. So, you have to divide the ‘results’ of the fair into different sectors. It remains the case that where leather is a craft and artisan product, an important component of high-quality consumer goods, plays a role for specialised use, it has not lost either its utility functions or its fashion significance. Where leather is used as a mass-produced article in standardised form, the problems in Europe are piling up. The reasons for this are now well known and sufficiently discussed, and the meetings in Milan have probably confronted even the last person who wanted to deny reality with the facts. This means that we now have to deal with the question of what the consequences will be in the near future. The decline in production and the corresponding adjustment of production capacities cannot and will not remain without consequences for the market. It is up to each individual to decide what conclusions to draw for the various European and German hide types. It is not necessarily the case that one could seriously believe that the development has come as a surprise, but we are not yet at the end and the final consequences have yet to be seen. In business terms, it was a quieter trade fair for us. Specialities are excluded from this, because in the ‘special things’ sector one remains more concerned with the details and planning than with the question of prices and sales volumes. The biggest problem, of course, is still the hides, which are considered ‘premium’ and ‘expensive’ by international standards. These are almost exclusively used in the European leather industry, which has the biggest problems in its price segment, first and foremost an extreme lack of orders, which is now leading to considerable restrictions in production almost everywhere and therefore also in the demand for hides. It remains to be seen what decisions the slaughter industry in particular will now derive from these findings with regard to pricing in the coming months, because if prices are not significantly adjusted, sales will continue to fall and the consequences of the problem will simply be postponed. In the case of female hides, sales are still possible up to a clear price barrier and as long as this is adhered to, there is no recognisable sales problem, at least in this segment and so far. However, this can change again very quickly towards spring.

The kill

We have no news to report regarding the kill. Volumes have normalised again after the carnival week and are neither particularly high nor particularly low, but in line with the season. In addition to the problems in the slaughter industry, what will happen to kills for the rest of the year and 2025 will ultimately be fundamentally determined by the cattle counts in May and November.

What do we expect

It will be surprising if the next few weeks are not strongly influenced by the fact that one has to process and digest the expectations, insights and impressions from the discussions at the trade fair. One has also the impression that some sellers urgently needed this trade fair in order to have a so-called ‘official reference’ to explain their problems. What conclusions and decisions will then be derived from this in the companies will inevitably become apparent in the coming weeks. Under no circumstances can the policy of supporting prices and hoping for an improvement be the concept and strategy for the coming months. Those who think in longer cycles and believe that they know other and better strategies in response to the current problems may come to different conclusions. However, we believe that there is virtually ‘no alternative’ to adapting the male prices to global price grid.