This week: The industry is working in routine mode at the moment and is taking care of orders that, with a few exceptions, already existed before the holidays. Otherwise, activity in the different markets is extremely dependent on the different situations. In China, a certain paralysis continues to dominate, resulting from the handling of the pandemic. Recurrent lockdowns are hampering business activity, and this is compounded by a weak property market and general caution in anticipation of the major Chinese Communist Party congress in October. All of this has led to a wait-and-see position in the world’s second-largest economy.

In Europe, everything revolves around energy supply for the coming winter. In most European countries, energy prices have risen massively and the effects of this are being tempered only by government interventions. In addition to price, the uncertainty of the energy supply is a burden too. There are still supply bottlenecks for a wide variety of products and for a wide variety of causes. The only positive thing to note is that sea transport costs have been falling again for some time and thus represent at least a small compensation here and there for the otherwise sharply increased costs.

In our sector we saw a typical week in the run-up to Lineapelle in Milan. Even in normal years, this fair is a very strong indicator of business development for the coming six or 12 months. This is more true this year than ever before because decisions for next season must and will be made. Where this does not happen on the spot, visitors will take home a relatively clear impression of the overall situation. 

Last week, the only interest was from specialists and niche suppliers. In the industrial sector, current deliveries are being processed and the next set of decisions on quantities and prices will only be made in the coming weeks. Of course, the impressions people pick up at Lineapelle will have a great influence on these.

Since the volume of sales is so small, the prices achieved can hardly be considered representative and this opens the door to all kinds of price speculation. The quality of the information must be viewed with caution and individual transactions cannot be considered representative of the entire market situation.

Once current programmes have been settled and renegotiations on regular deliveries of larger quantities take place, we will probably get a clear picture of the real price situation for the first time since July. How long we have to wait for the next major round of sales in China also remains uncertain. As far as we can tell, it will probably take a few more weeks.

Probably the most important subject at the moment is good information about the relocation of leather production. The greatly changed cost situation, sanctions, the demand for leather products and their prices, the development on the market for collagen and the regionally different consumer behaviour will in aggregate and all likelihood have the major influence on the market’s development in the coming months.

The kill: The kill is increasing exactly as expected and the volume development is almost textbook. However, the development of meat prices and buying behaviour in the supermarkets must be watched very closely. The cost situation for farmers and slaughterhouses is threatening and whether it will be possible to sustain meat prices with consumers is very uncertain. The situation can change very quickly; a lot depends on the livestock market with the corresponding consequences for slaughter activity.

What we expect: It probably makes little sense to make any forecasts before the end of Lineapelle. However, the probability that everything will suddenly change for the better in the next week or so is not high. There is no question that the luxury sector and specialities continue to show a much more stable development and this might be confirmed also in Milan. The big question mark that we would like to have answered during discussions at the exhibition centres on production for the mass market and the extent to which the leather industry can successfully pass on the increased costs without having to accept too large a drop in volume.

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