Market Report 26.01.2024

What happened this week

As we expected last week, this week was also very quiet and almost uneventful. It was and is hardly surprising, as Asia is now slowly preparing for the interruption caused by the Chinese New Year and in Europe we do not expect any major activity to take place beyond the stable and long-term supply relationships that cover basic requirements. Nobody happens to need more or different hides at the moment and nobody expects to attract much interest with unsolicited offers. Prices have been very tight for a long time and whichever tanner you speak to in Europe, everyone will confirm that although it would be good to see prices fall even further, the fundamental problem is not the price but the order situation. With the exception of a few specialised sectors, there is simply not enough demand for leather in Europe. If you look at the calendar, there is not much time left to land additional and new orders in what is actually a period of seasonal, strong production. As a result, everything continues to ripple along without any recognisable events that could change this basic situation. Activity in Asia slowed down considerably over the course of the week. On Monday and Tuesday, the already routine enquiries and bids for female cattle hides came in, but there were no longer any long and dynamic negotiations. Either you took what was offered, or the interest disappeared as quickly as it had come. The prices were still always around USD 2.00 below what would actually be considered reasonable, but the willingness to negotiate prices to a larger extend was extremely low. Only for somewhat heavier hides was it still possible to talk about small increases. Interestingly, we heard several times from China that the upholstery leather industry was complaining about a lack of export orders for furniture leathers and therefore the competition for prices on the local market is increasing. As the furniture leather production season in China comes to a relatively quick end after the Chinese New Year, it will indeed be very interesting to see how buyers will behave in the coming weeks. Under normal conditions, the volume of demand alone should decline significantly for the goods arrive after April. This week, too, one continued to get the impression that all parties involved have little expectation of major price changes in any direction, which is why they are not even attempting it at the moment. This leaves us with the question of whether, at this level, all hides are actually finding a buyer at the moment, or whether more product is stranded along the supply chain than some are willing to admit.

The kill

The situation with the kill is also very uneventful. Neither live cattle prices nor production figures are fluctuating widely and volumes remain perfectly normal and expected for the time of year. Hide weights are relatively heavy but also normal for the season, although they have not increased significantly for some time anymore.

What do we expect

Even last week we lacked any imagination to expect major movements in the market. Of course, it is true that the longer the calm lasts, the greater the likelihood that something will happen. However, it seems to us that the time has not yet come and there is much to suggest that price changes will have little effect on demand in the coming weeks and we therefore expect prices to remain largely stable in the near future. The next decisive turning point will probably be the trade fair in Milan and there is not much time left until then.