Market Report 02.02.2024

What happened this week

This week, too, we do not have much to offer in the way of major and significant new insights. We are feeling the season and the Chinese New Year and this means that activity in our markets has decreased noticeably. Of course, every tanner still buys what they need for their production and orders, but this means that they don’t usually go beyond the minimum quantities from regular suppliers. Even if you don’t like to hear it, it would be unrealistic to ignore the darkening situation in the European leather industry. Of course, people are very reluctant to go public with bad news and, as we know, problems in our industry have always been concealed or played down. It is human and psychologically understandable that people prefer to focus on the hope rather than the current problems, but sometimes that doesn’t help either. This week, new news about major production adjustments made the rounds again. There have been reports of redundancies at larger companies, and when you combine this with the already reduced production levels in many companies, it would be negligent not to take note of this and spread the view that everything is fine. Admittedly, this is a very European problem, where at the moment both weak consumption and rising costs represent a really very toxic mixture. Of course, there are also one or two positive developments, but the volume of these cannot compensate for the fundamental problems. We have the impression that many people, especially in the meat industry, simply do not want to face reality. While the female and lighter products do not pose a major problem because their prices are orientated to the world markets and can therefore be sold at any time without major price changes, if one so wishes. The situation is different for the male and heavier goods, which have for decades been almost exclusively targeted at European markets and customers. Demand is declining in Europe and these hides are simply too expensive for the international markets. This is not helped by the occasional one-off transactions. Of course, you can continue to play the game month after month, but without a fundamental improvement in demand, nothing will change. At the same time, standard customers in Europe are suffering from the considerable competitive disadvantage. Business this week can be described as very quiet. There was still interest and demand from China, but in most cases customers’ price ideas were always slightly below the pain threshold. This meant that we only made very isolated sales, but if we had responded to the prices, we would have been able to achieve significantly more. In the case of male products, the business was limited to the minimum quantities that we agreed with our regular customers on a monthly basis. If you also look at sales from other regions, you realise that once again it is almost exclusively the market in China that is driving the commodity markets. As is so often the case, people in China are prepared to buy low-priced raw materials, even if they may not yet have any orders for the leather. This volume and price dependency is certainly not good news.

The kill

Kills are slowly declining again and this is not unusual for the time of year and the weeks before and around carnival. Despite all the media pressure, it has to be said that beef consumption is doing better than many interested parties would like to admit. As is so often the case, opinion and actual behaviour is sometimes far apart.

What do we expect

Next week, assume that the Chinese tanners have finalised their plans and purchases for the coming month and will celebrate the New Year in peace and quiet. For us, all eyes will be on the new price negotiations at the abattoirs. We can only follow with great interest what decisions the market-determining forces will make regarding prices and whether a forward-looking and sensitive approach to the market situation might be an option. We do not expect any major official price changes on the sales markets, as we can hardly assume that there will be sufficient market activity in the next few weeks for any price changes worth reporting. The market truth will have to wait a little longer.