This week: All in all, another very difficult week. In addition to business and the daily questions of how supply and demand are developing and what prices are to be paid or demanded, the pandemic, logistics and of course the political situation continue to play a major role.

In Germany, covid-19 cases continue to rise rapidly and to burden companies in many ways. This is also reflected in the slaughter industry, where there are worker absences and a correspondingly low ability to plan production. Of course, this is not only true here, but also in other countries.

In the end, the situation is little different on the buyer side. Add to this the difficulties in transport logistics and every shipment to Asia is a gamble at the moment. Ships are delayed, delivery to the ports can hardly be planned. One could only be happy about overseas shipments that do not have to be made under any time pressure.

The main problem, however, remains that we do not know when this situation will finally come to an end. It doesn’t look like it will be in the near future. 

Customers in Asia are already or will soon be going on holiday for the Chinese New Year. This is followed by the Winter Olympic Games and the continued very rigorous policy against the pandemic makes it completely unclear how far the government will go with closures. All this leads to further regional imbalances because the flow of goods, both inbound and outbound, is simply impossible to plan for. Neither are production costs foreseeable. Rapidly rising energy and chemical costs will have a significant impact in the next few quarters.

Business last week was affected by the closures in Asia and by ongoing purchasing negotiations with the abattoirs. Despite concerns and warnings, prices are rising moderately owing to the pressure from sellers and the continued relatively low kill. Due to relatively low sales and the general wait and see, no really binding direction has yet been able to emerge. The only thing that is certain is that higher prices will have to be demanded from the customers.

For the European tanners, who are mainly dependent on fresh goods, the increases for male hides can be agreed to some extent. Where one comes up against international competition, discussions and negotiations will certainly become much more difficult.

The few sales this week were limited to specialty items, with the increasing interest for lighter merchandise in Europe being the most notable. For the most part, however, prices remained mostly unchanged.

In China, too, there is now probably more of a wait-and-see position ahead of the Winter Olympics and Chinese New Year. Business is never zero, but overall interest is much lower than during the holidays. However, due to the very low slaughter and the simultaneous low buying interest, the turnovers and sales are so small that one cannot speak of a representative price development during these weeks.

What can and must be done continues to take place within very narrow limits around the prices we have been seeing since the beginning of December. If we are honest, we have to assume that there will be an almost four-week production pause in China from this week to mid-Feburay, and at the same time there are still considerable shipments to be made. In addition, at the end of March, the production of furniture leather will slowly decrease and, so far, no compensation from other sectors is visible.

The kill: The kill numbers still lag behind planning and expectations. High prices and lack of supply for livestock, the covid-19 problems in the food service industry and the resistance of food retailers to higher meat prices have all weighed on production. Shortfalls due to quarantine measures added to the problem.

What we expect: It is now a matter of implementing the new prices and closing the deals for regular deliveries in February. We expect slight mark-ups for male hides, but this will probably be much more difficult for female hides, depending on destination.

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