Market Report 29.09.2023

What happened this week

This Friday also marks the end of the last week of the third quarter. That it is also usually the final end of the summer rest and the start of the phase of higher production and equally higher kills. Presumably this will also be the case this year, although there are at least some doubts and possible surprises being discussed regarding the situation in Europe. Above all, some of the automotive leather tanners in Europe do not give the impression that a significant increase in production can be expected in the coming weeks and months. There may be many reasons for this, but neither vehicle sales nor the use of leather offer much hope for a significant improvement at the moment. If one stays in Europe, furniture leather production from mid-October onwards is actually always a guarantor of stable demand for raw hides. Here, too, the information one gets from the retail trade, from the furniture factories and from the corresponding leather manufacturers is not particularly positive. And elsewhere, too, the excessively high stocks in the retail sector are still pressing. So, the focus this week remains on the continued activity of customers in Asia. Here the week was actually almost identical to those we have seen since the end of August. There is always a lot of interest at the beginning of the week and sales are actually always possible. This week, as the US dollar remained firm in the first few days, price negotiations were somewhat easier than in previous weeks. One always starts with prices that are one to three US dollars below the offers and then slowly but surely works its way towards corresponding price compromises. The focus of interest remains on female hides, but here and there, surprisingly, selective deals for heavier male hides were also possible. With the male hides one has to make somewhat larger price concessions – if one is willing to sell – whereas with the female goods, as already mentioned, the differences are not so great. In the second half of the week, activity and interest dropped significantly, but this could not really surprise anyone, as China is almost completely in holiday mode for a week as of today. What was pleasing and a confirmation of the improved situation was the fact that payments and shipments were also settled quickly before the holiday and the holiday period was not used as an opportunity to delay, as so often in the past. The only question now is how sustained the interest from China will be in the coming months. There are quite a few voices that believe that the purchases of the last weeks and months were made to a greater extent by traders who now want to convert their relatively low average cost prices into actual realised sales and profits and therefore one could possibly enter a phase of pause of purchases after the holiday.

The kill

The kill is now slowly increasing, although the weather continues to be rather summery. This is attributed to relatively good export business for beef. This would be pleasing if it could alleviate the problems in the slaughter industry somewhat and possibly compensate a little for the decline in volume nationally. Otherwise, there will be little change in the normal rhythm and as soon as the weather basically adjusts to the season, the kill will also increase.

What do we expect

Next week, the market in China will probably drop out as a player. This means that the focus will be more on European customers again, and this is where the fundamental problems lie, which are still waiting to be resolved even with the better business in Asia. These include in particular the stocks of semi-finished material, which are simply too expensive for the world market. At the same time, there is not enough demand for them in Europe. Thus, a price structure in line with the market for the different hide types will probably continue to be struggled for.