Market Report 04.08.2023

What happened this week

We are now in summer mode and it will probably stay that way for a while. This means that the European tanners – with a few exceptions – are on holiday and in most other offices, too, only skeleton staff are present. In the course of the next few weeks, the first people in Northern Europe will return from their holidays, while in the South the holiday period has just started and we do not expect a normal presence in Europe until week 34. So, all eyes remain on Asia, at least for those who still want to sell hides and skins at the moment. In Asia the picture remained unchanged. It is obvious that they were waiting for the holidays in Europe and that they have to ensure a supply of raw materials due to the long delivery times, if they want to or have to fill the drums again. So, there was regular interest in hides again this week. However, price negotiations remained very tough again and often there were no further answers when bids were not accepted. Nevertheless, one or the other deal still ‘netted in’ and with a little luck on the foreign exchange market and the lower freight rates, the revenues in EURO are again somewhat better than a month ago. Most of the interest was again focused on cowhides and it is clear that there are still very clear price limits. Now everyone can derive their own opinion from the situation. The optimists, and thus most sellers, see it as the turning point after the long period of depressed prices and rather difficult situation, while others see it more as a temporary change due to the rhythm of industrial production rather than a fundamental improvement in conditions. It is possible that customers in China are hoping for government stimulus and improved financing opportunities. The crucial issue, however, will be sustainability, which ultimately requires better leather demand and higher leather prices. It is certainly much too early for this and we will probably have to wait until the end of September to have reliable information on this. Until then, the short-term and momentary market behaviour will determine prices and developments week by week. With the low kill and the still very difficult times in the meat industry, the sales to Asia and the planning for the time after the holidays in Europe are sufficient at the moment not to let further stocks grow. This reduces the pressure on the general market, but one should still keep an eye on individual segments. The heavy and relatively expensive male product seems to lose some of its special position. In particular, the producers who dominated this market for decades and paid price premiums to fend off competitors from other sectors have become much more price sensitive and the weaker market for by-product revenues is also playing a weighty role. On balance, we look back on a normal summer week – with a lot of rain – and no serious changes.

The kill

The holidays are also having an impact on the meat industry. Fewer staff, less demand from food retailers, structural problems that somehow have to be solved in the rest of the year and the unrelenting pressure against meat consumption from politicians form a difficult mixture. For the next year, not much can change yet because of the herd, but especially the decisions of the livestock industry have to be watched closely in the near future.

What do we expect

For the next few weeks, the pressure is now somewhat off and anything other than a wait-and-see attitude on the part of the sellers, also with a view to the upcoming fairs, would be a surprise. If no one fears that prices will fall, no one will be eager to secure sales. Since there are hardly any fundamental changes in leather demand and prices during this period, forecasts are hardly really reliable. We know that sellers only care about the price of the day and not about the situation in two months’ time, and for some a positive momentum would be helpful, because the questions about many old stocks have not yet been answered.