This week: Overseas business was dominated by the situation around the outbreak of the pandemic in Hebei province in China. The Chinese government has taken very strict action and sent the province, an important centre for leather manufacturing, into an almost complete lockdown. This is not only hitting the normal life and factory production, but also financial institutions and logistics. Some believe that it will just be a short-term measure because the outbreak will be quickly under control again. 

It’s a very difficult subject to discuss because the pandemic and the decisions the government is likely to take are equally difficult to predict. For the moment it means, that purchasing activity is reduced to a minimum and this is understandable; tanners want to know first when they will be able to reopen their factories. In the worst of all cases, the lockdown will continue until the Chinese New Year holiday (starting around February 12), which would not only have a strong impact on purchasing activity, but also on everything that is related to pending contracts and shipments.

 For the moment tanners are certainly not willing to consider steady or higher prices and if business is proposed it is mostly at a discount versus the last traded levels. For most sellers, we assume this is not an option and this brought most business with China to a standstill last week.

The situation in Europe was somewhat different. The focus of the trade was entirely on the negotiations of the abattoir prices, once again dominated by short-sightedness and self-interest. The negotiations were mostly concentrated on heavy males or better-quality males in general. The lower kill in the first two weeks of the New Year is curtailing the standard product flow into the quality tanneries that use male hides. The situation is amplified by the Brexit because it is bringing fewer hides, for various reasons, from the UK onto the European continent.

These conditions led meat companies to decide to ask for significant increases for these particular hides but they encountered very strong resistance from the tanning industry. Tanners are pointing to the fact that leather prices are in decline with a normal time lag and, in addition, warnings about a possible reduction in the demand for automotive leather in the second quarter of the year.

A brighter spot might be the quality shoe leather segment, in which demand lagged behind the general recovery of the market in the last quarter of last year. By the end of the week there was still no common agreement about price levels and the ideas of the meat companies are making relations difficult. Fortunately, the situation for females was more realistic because, in view of the market conditions, the currency market and the constantly rising transport charges, the market in this field is far more vulnerable.

For us there was almost no serious interest for hides from Asia, except the general enquiry for offers that in the end went mostly unanswered.

The kill: The kill is stable, but at the normal, reduced seasonal levels. In particular the volume of males is hit with the usual decline in demand for better cuts after the holiday season.

What we expect: It seems we will still need a little while until the market irritations are sorted out. The balances are once again disrupted and opinions differ about prices and the future outlook of the business, as well as about fair valuations. We would appreciate a bit more sensitivity in these times.

Share this story: