What happened this week: One can question whether in times like this market reports make any sense. Generally, it is fair to say, no. 

First of all, we are missing the market. Describing the situation as chaos might be more adequate. We see a total implosion of leather demand with a huge number of manufacturers being closed. It’s difficult to get a clear picture of consumer demand and real sales. Published reports from retailers reflect a sharp decline; with shops and shopping malls closed all around the globe, interested shoppers would not even find much on offer except through internet platforms and e-commerce. 

When normal life has almost completely stopped, families and individuals focus on subjects other than shopping for the classical leather products. Getting toilet paper, disinfection liquid, facemasks and food is what people are interested in. This may be extended to laptop computers, printer cartridges and electric components to run the home office or just to stay in touch via the Internet. It is very difficult to find any product made from leather which could be placed in the top section of today's priority list. 

China tries to return to some normality by slowly easing restrictions and promoting the rise of industrial production. However, it's going slowly, because almost every export market is on lockdown. Factories might be able to raise production back to normal levels, but that requires sales or, to be more precise, export orders. 

The aftershocks are beginning to hit the economy, namely via cash flow problems and the lack of planning for the future due to the high uncertainty of the conditions. In Europe we are mainly hit by the shutdown of the Italian tanning industry in combination with the halt of the automotive factories. Just today the Volkswagen Group announced an extension of production stops for some more days. It explained that the safety conditions for the workforce will be maximised, but also confirmed there is a lack of demand for the vehicles built — which might be the real and main reason. 

The raw material market is a challenge. There is still some production left and leather produced, but the level is low. The shutdown in Italy has interrupted the sufficient supply of lime split products and, with the stable demand from various directions, most were too busy to check if and how helpful interim supply chains could be organised. The hides suppliers and slaughterhouses, which have insufficient salting facilities, were too busy to find solutions either by contract tanning or by checking whether salting capacity could be organised or contracted. That made all kinds of serious price finding operations fairly useless and all kinds of prices for hides were thrown around from all markets. Commercial logic was lost and so also any order and control over decisions. 

In Europe, just shorted program deals were concluded to keep product flow and productions running. From China the usual suspects were again seen bidding all over the place in what can clearly be considered as the usual gamble, rather than planned cover or based on a need for leather orders and productions. Their main aim was to break into the premium quality hides at commodity prices what does not make any sense either. The number of sales was limited, but not as low as one was afraid of. 

The Kill: The kill remains on stable levels, confirming that people may be isolated and locked in, but still eating. We are also told that exports are beginning to materialise again.  

What do we expect: We hope the dust settles a bit in the coming week. The fundamentals are clear, but the consequences not (yet). Players will have to sort the situation out and draw their conclusions for the weeks to come. No plan and no idea is certainly neither an option nor a base for operations, but working in unknown territory is difficult too. So, let’s at least try.

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