German Perspective – 24.03.20
What happened this week: What seemed to be far away somewhere in Asia several weeks ago is now next door to us. Our situation is now almost exactly the same as it was in Asia and we can only hope actions here will be as effective as they are reported to have been over there.
Finally the lockdown and isolation strategy to fight the coronavirus has been adopted all over Europe and we will know some time in the near future if all individual actions decided in the various countries are sufficient or appropriate.
In the meantime we are facing the first almost complete meltdown of the economy. Supply chains are interrupted, most regular productions have stopped and our countries are struggling to keep service, security, medical care and the general basics of life intact and working. There are so many unknown factors that it is not clear what the long-term consequences for the economy and our societies are going to be.
In the leather pipeline it has become increasingly difficult to keep normal activity going. With the announcement of the automotive industry to shut down most factories for a period of time, the question has arisen over what is going to happen with the just-in-time delivery of fresh hides to the key players in this sector. The daily soaks of fresh hides will be substantially reduced from this week onwards. The major tanning centres across Europe are already facing or are preparing for a substantial decline in production.
Demand for consumer products made from leather has collapsed and we can only speculate about when a recovery can be expected. Tanneries are doing what they have to do as best they can to keep production afloat. It is not just the question of demand; it is also a question of logistics. Taking care of the workforce and following all the regulations from government are influencing the situation.
China claims to be through the worst and the country is trying to stabilise and ramp up production again. Nobody knows what the exact number is, but something around 50% of normal production levels seems to be a realistic figure. However, this doesn’t mean anything if the demand is missing for the product. Any serious, reliable information about leather orders has been unobtainable, at least for us.
Most contracts local or overseas are going to expire within the next few weeks and suppliers and tanners are now beginning to discuss how a workable basis for trade can be found. We are all working in unknown territory and that makes it exceptionally difficult.
Despite the recovery of production in China, the demand for raw material continues to be weak; there are still sufficient stocks from the time when the factories were closed there. Some of the usual suspects see the present situation arising in Europe as an opportunity and do their usual bottom-fishing to test the waters. We don’t consider this to be fair at all and so we have not been in a position to come to any sales conclusion in Asia. This has left the number of sales at the minimum level and mostly for small and specialised niche producers.
The kill: The kill has been reasonably regular, serving the supermarkets where people were rushing and engaging in panic-buying. Beef for convenience food production has been in good demand, although prime cuts did not find any demand at all.
What we expect: The focus is going to be on the abattoir buying. It remains to be seen if there will be agreement on buying just to take care of the hides. A serious person cannot really reach any conclusion on pricing for raw material at the moment.
