This week: This week finally showed a clear market movement again with sufficient activity to derive certain conclusions and a basis for price development.

On the one hand, it became very clear during the week that many tanneries in Europe have already significantly reduced their production and, if necessary, will either plan further restrictions until the beginning of the new year, or end the year at a low level. This has so far been partly offset by the reduced kill and by the activities of traders and producers of semi-finished products, holding back the expected price pressure for raw material. But inventories in the tanneries are beginning to increase steadily and it is becoming clearer by the day that hopes for the usual, seasonal recovery in leather demand may be dashed this winter.

Many problems have been masked by the rather good business in better ranges and the significantly improved revenues for lime splits. Both effects have meant that the tanneries have mostly been able to cope with the strain on liquidity over the past six months without any problems, but in the meantime there are no signs of improved demand for the medium and lower ranges of leather. It can therefore be assumed that a further increase in inventories in these ranges will hardly be avoided in the coming months.

For this reason, the opportunity of the Christmas break will be used, as will an already reduced soaking level, to make sure stocks don’t grow further by the end of the year. Even if in recent weeks the prices for gas and fuel oil have fallen again, energy prices for the winter remain an important issue.

Consumers are clearly holding back on new purchases, and hopes of an active and successful Christmas season are also dwindling by the day. In China, covid-19 continues to spread, leading to new lockdowns. If this does not directly affect leather production, it does affect supply chains and logistics.

As much as the weaker US dollar is helping with import prices for energy, it is also weighing on revenues for exports, and this includes cattle hides.

Business-wise this week, the last delivery programmes were made for the rest of this year. If one wanted to secure the purchase quantities for bull hides in the coming weeks with regular buyers, price reductions of 5%-10% were necessary, depending on the type and weight. Cow hides have suffered to a lesser extent, but they were cheaper already; how the currency situation and the situation in China will affect this is not yet fully clear. For the moment, for those who care, quantity goes before price and taking into account reduced production in the coming weeks and then the Christmas break, the decision is either to accept what is on offer or keep the merchandise for 2023.

The kill: The kill is now pointing upwards for the next few weeks. After a long period of waiting, higher slaughter volumes are now announced and we expect increases of between 10% and 20% in the coming weeks. This is not yet visible in beef sales, but the fattening cattle are available and have to follow their cycle, one way or another. In the next few weeks, significantly colder temperatures are expected and this should then also be reflected in the kill and meat consumption.

What we expect: Negotiations on purchase prices at the slaughterhouses are pending. The cost of collection and processing have risen massively at all levels. The demand volume and prices for standard leather and hides have not. One can certainly always hope that a magician will appear and make the problem vanish, but that has never worked to date. European hides will always find their market because of their quality; but you have to be competitively priced, which is why people prefer them. Whoever ignores this and waits for the magic-want solution will probably have to be patient for a while, because even our hides do not only consist of top-quality products.

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