Market Report 09.02.2024

What happened this week

As expected, this week was also very quiet. In Asia, people were preparing for the Chinese New Year celebrations and most customers closed their production facilities for at least one, but often two weeks. In Europe, in many parts the next few days are dominated by carnival and in many regions this is much more important than anything else. In any case, the fact is that many companies will only be working with skeleton staff over the next few days and this will also significantly reduce activity this week. In addition, we are now – as we are every year – in the phase which, alongside the summer holidays and the Christmas break, is one of the quiet periods in the market. After the Chinese return from their New Year holidays, interest will then focus on the trade fair in Milan, from which many hope to gain new insights. It would not be surprising if they were then relatively disappointed. It seems that the world is currently in a new phase of discovery. The geopolitical tensions, the resulting transport problems and, above all, the considerable problems in Europe are weighing heavily on the mood. This also explains why the current market situation is probably rather divided. On the one hand, we can look back on a long period of steady interest in hides from Asia, and on the other hand, the problems in Europe continue to pile up. However, in order to put the brakes on any enthusiasm, it must always be emphasised with regard to Asia that this is only about the relatively inexpensive raw material. Despite all the interest, this has clear price ceilings and as long as the price of leather cannot be pushed up again, this will probably not change, especially as there is currently no shortage of raw materials worldwide. In Europe, we are suffering from the locational disadvantages that have already been discussed many times. Added to this is the crisis on the consumer goods markets and in the retail sector, which means that the urgently needed demand in the medium and higher price segments has suffered disproportionately and continues to do so. This is putting many European leather manufacturers in particular under massive price and capacity utilisation pressure. The overall consequences of this cannot be foreseen at the present time. Despite all the complaints and all the obvious problems, there have not yet been any major decisions in the industry that go beyond reducing production. However, significantly reduced capacity utilisation is certainly not a long-term solution either. In this week’s business activity, demand has been limited to the more random spot transactions, which are mostly still limited to the last interested buyers in Asia. Apart from that, the slaughterhouses are trying to play for time, as unfortunately a uniform price picture at the abattoir gate for the month of February has yet to emerge. However, this will not change the necessary adjustments demanded.

The kill

Many are complaining about low kills. We can’t really agree with this, as volumes are always reduced at this time of year and we can’t really see any unusual changes. Perhaps it is just as well, because the question is whether a larger slaughter volume and the resulting higher quantities of hides would be good news at all at the moment. The prices for live cattle are stable to slightly more expensive, which is not good news for the slaughterhouses at the moment due to the reduced demand for beef.

What do we expect

In the coming week, or perhaps even better in the coming weeks, we expect the same very quiet market situation. The demand for leather is not increasing, we cannot recognise any increased need for raw materials and the structural problems will not be resolved in the coming weeks either. Presumably, the trade fair in Milan, where many people will once again be able to meet in person and exchange ideas, will be the trigger for some to get a clearer picture of the trends for the coming months.