This week: More than 50 days have now passed since the Russian invasion of Ukraine. The human suffering overshadows everything, yet all over the world the impact of the war’s aftermath must be considered. Besides the direct and already known effects on the energy and food markets, the uncertainty remains as to what might happen in the weeks and months ahead.

Despite the drama, the world continues to turn and the hide market and the decision-makers involved in it are a reflection of society as a whole. Some are extremely influenced by the situation in Ukraine, while others are almost completely oblivious to the events and their possible consequences. Neither is particularly helpful in such difficult phases.

Putting aside the horror of war, it is very likely that the current situation with lockdowns in China will have a much greater significance for the leather industry. With each passing day that the Chinese government’s zero-covid strategy continues, it hinders activity nationwide and the problems for the hide market intensify. Meat production worldwide continues unchanged and thus hides and skins as a by-product are constantly produced in corresponding quantities. The war in Ukraine plays only a minor role in the overall balance of the world market, but the decline in production in China, the largest producer of leather, plays a greater role.

Those in Europe who are currently ignoring this risk are certainly playing a very dangerous game. This was shown again in the purchasing at the slaughterhouses for the month of April, where individual players are completely ignoring the current risks. Obviously, some players who lack experience and an overview have not yet realised that prices in the main supplier countries have already fallen by 20% or more this year and that the market risk for European hides has therefore increased massively.

This is all the more true as the market in China is not absorbing its normal quantities at the moment. We are in the weakening phase of annual leather production, but at the same time the supply of raw material worldwide will tend to increase in the coming months.

For business, last week involved some really tough negotiations and a struggle to maintain sales and ongoing programmes. Compromises were often agreed for April, but it is unlikely that under current conditions the leather industry will be patient for another month and willing to support the inflated European price levels again.
For this week’s sales, this meant that only the current programmes for April were extended and this was mostly at little-changed prices and the ups and downs were influenced by the respective grades.

The kill: The kill was again relatively high before Easter. There is one production day missing for two weeks running, so the total quantities will tend to be somewhat lower. Live cattle prices have calmed down somewhat and have fallen for the first time in many months.

What we expect: From our point of view, the price risk increases with each additional week in which no adjustment takes place in our region. The current official prices do not reflect the real situation of the market. One may be forced to quote and defend these prices, but in the end one cannot escape the world market. It is therefore very unfortunate that the opportunity to adjust prices and minimise risk has been missed in recent weeks. It seems that the lack of expertise to manage crises and risk is still widespread in this business and in particular in the community of employed hide sales managers and ‘strategists’.

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