What happened this week? The coronavirus continues its tight grip on all of us. In most countries lockdowns of varying degrees dominate daily life. The ongoing briefings from scientists and politicians are catching the attention of most people and everyone is trying to organise his or her own life as well as possible. 

This applies to business as well. China has already eased restrictions on daily life; it's a bit like the first in, the first out. However, although infections and casualty rates begin to slow and fall, most countries are still far away from anything that can be considered normal. Without a working vaccination or a sufficient immunisation, the virus will continue to influence the world. 

The biggest problem for most continues to be the uncertainty around when and how a normal daily cycle can be achieved again. From all that anyone knows, that is still quite a time away. Consequently, people are beginning to ask how any kind of easing of restrictions can be applied, and politicians are trying to find exit strategies in the best way they can. There is plenty of room for speculation and ideas — there’s something on offer for every taste and opinion and that makes it so difficult to find a common way to solve the issue. 

As far as the leather business is concerned, we are dealing with uncertainty on almost all parameters. Hide production depends on beef consumption, which is highly affected by the difference in sales and qualities. While processed beef is still selling in supermarkets, prime cuts continue to be a serious problem. 

Without restaurants and export for consumption, most prime cuts are going into freezer plants. The EU is now discussing intervention; if this takes place, it could offer the slaughterhouses a secure outlet which could eventually boost slaughter numbers again. Until this happens and there is clarity on how it will work, beef production and slaughter rates are going to be low. 

On the selling side of leather, we are still missing a clear picture of when factories will resume production. However much the future of production remains in the dark equals how little we know about how the consumer is going to behave. Fear of job losses or cuts in monthly income seem to weigh heavily on consumer spending. All polls are showing dwindling consumer confidence and massively shrinking intentions to return to the shops.

Travel and tourism will suffer this summer and leather goods are frequently part of the spending during the vacation or travel. Available cash is another problem, and with congestion in the pipeline and some orders being cancelled, it is unclear what effect this is going to have on the leather business over the coming months. 

Last but not least we are all suffering from rising freight charges and reduced container equipment for shipments overseas. The Chinese have been active wherever they are able to grab cheap raw material. Many may feel this is once again the time to commit to cheap raw material for the long term. The critical point might be how serious they are when it becomes evident things are not going to improve any time soon. 

Some sales to Asia were completed this week with the focus once again on better-quality and heavier cow hides. Prices were a big struggle, but for premium material the tanners were finally willing to pay what was asked, which is already cheap enough. 

The Kill: The kill continues to drop, and many beef plants have been closed for days or operate at fewer hours.  

What do we expect: Until mid-May we are unlikely to know in what direction we are heading: toward a slow recovery or toward a second sharp decline in demand and production of leather.

Share this story: