This week: The pandemic has changed many things. This is not news; we have all known it for more than a year. At first, we all thought that the problem was simply one of supply and demand. Now we know that many other factors, especially logistics, can have a massive impact on our businesses. Political issues and monetary policy can also play a role, and the considerable restrictions on international travel, limiting the possibility of having face-to-face meetings, most certainly also has an effect in such a specialised business as leather.

Until this summer, things seemed easy. Last year, the pandemic raged, consumption and production came to a standstill and prices plummeted. Meat production continued, however. This quickly changed as production and consumption recovered with the initial success of the fight against the pandemic in China, first locally and then on a broader scale. In the meantime, Europe and the US returned to a degree of normality and consumer goods had to be supplied.

Now we are learning that the system of global logistics simply no longer works. This has created problems that spread in many directions. The best example of this is in the automotive industry. Transport and, in some cases, supply problems caused by decisions made a year ago are now having a considerable effect on the auto leather industry, just as they did in the furniture industry. The issue is so complex that it cannot be dealt with using the simple methods and experiences of the past. It is no longer a question of whether customers buy cars or not, but rather a question about what can be produced, delivered and paid for. 

In Europe, the low kill and the restart of production after the summer holidays are still protecting the market. Fortunately, in contrast to many overseas markets, there is not yet a massive backlog of goods. Business this week was concentrated on the tanners who have already returned from their holidays. From  China, customers have been testing to see how far they can push prices down and this has mostly been in the range of between $3 and $5. Contrary to the majority opinion, we do not see prices rising any further in Europe, despite the low slaughter. We are now curious to see if prices in Europe can decouple even further from international levels.

The kill: During the week, slaughter slowly increased again. The levels are still below what we expected following the holidays. In principle, however, we must assume that the trend towards rising meat production will continue moderately in the coming weeks.

What do we expect: There are indications that agreement on price will be very difficult in the coming weeks. All the negative arguments are gaining momentum at the moment and this is once again in stark contrast to the ideas of the meat industry. The next few weeks seem to be another period of transition. We continue to see more risks than opportunities and hope that the situation clears up one way or another when the higher kill starts in October.

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