German Perspective – 11.02.20
What happened this week: The coronavirus outbreak is showing us what globalisation really means and what can happen if the smooth flow of the network stops. This time it is a virus, but many should be aware that this could also happen as a result of a political decision. Populism and nationalism could quickly spread with the same consequences, like a virus, with the only difference that it might be much more difficult to control and put under quarantine.
How dangerous this outbreak of the coronavirus will be in the end is unknown. Outside China the reaction is relatively relaxed and even some major trade shows, such as Micam and Lineapelle-Tanning Tech in Milan, are going ahead. This applies not only to the trade shows for leather, but for many others too.
It is now more than two weeks since this issue began to make headlines. What had been a pretty isolated and regional matter is now affecting business around the globe.
In the hide business in Europe a number of sellers had begun to try to create a momentum for rising prices. This might have been questionable even before the coronavirus outbreak, but if they are successful now it will cause serious problems. The biggest difficulty is the price that the abattoirs want to charge. Optimists had already sent positive signals and the don’t seem able to set those aside.
It is more difficult than ever to predict the hide market trend because it is a simple lottery to know how the business is going to be affected in the weeks to come. The spreadsheets tell us that sales, production and shipments will not reach the levels planned. A longer break for tanners in China will not only interrupt planned shipments, but also possibly lose us a good part of the remaining active production season.
As far as business is concerned, the week was reasonably quiet, which was no surprise. At the beginning of the week there was still a reasonable amount of interest from China, in particular for
the premium grades of cowhide. Any bids were quickly withdrawn, though.
The kill: The kill continues to suffer. Beef prices are under pressure again and European consumption is discouraging abattoirs from looking for higher production. There’s little to make anyone expect a change in the short term.
What we expect: We think that prices will come under pressure again. The wait-and-see attitude of the tanning industry will continue and this means that only the just-in-time and bread-and-butter business in Europe can be considered stable. Others will try to take advantage and push prices lower.
