This week: Last week was a week of hard work and extremely tough negotiations. After many discussions about new agreements for the month of March at the trade fair in Milan reached no conclusion, the negotiations had to be resolved one way or another the following week. This would certainly have been much easier if the prices at some slaughterhouses had not increased in advance and in anticipation of rising sales prices. Rising prices for split and individual deals for special categories were often used as explanations for this.

The low kill in February also played an important role. However, higher prices are an extremely sensitive issue at the moment, at least in the European leather industry. Lagging orders and increased costs are causing great problems for many tanners, so rising raw material prices do not fit into the picture at all. The high level of uncertainty regarding leather orders for the next few months is not increasing optimism and a certain willingness to take risks in the procurement of hides is required. This has made negotiations on price increases extremely difficult and good will had to be called upon to reach any kind of solution. In the end, probably no one is happy. For the tanners, the higher prices put a strain on their calculations and for us the small price increases will not be enough to compensate for the increased cost prices at the slaughterhouse to say nothing of production expenses.

We see the main problem in the tanning industry only partly as price; the volume of leather orders, which at the moment is simply not sufficient to fill all tanners’ productions, is also an important factor. This is especially true in the furniture sector where there is a lack of orders and, looking at the calendar, it is very unlikely that orders will improve in the next three or even six months. In addition, an imbalance in the marketing of the different grades is weighing on the outlook too and the costing as well. 

In China everyone is talking about the falling lime split prices, which was the real reason for an improved sales situation in the last weeks and months. Nobody is talking about an improved order situation for leather, even after the end of the restrictive pandemic policy. So, if production capacities in the leather factories are being utilised on the basis of demand for split, this is not a sustainable basis for an improvement in the market situation either. Reduced freight costs and a slightly strengthened US dollar in Europe can only partially compensate for this.

For tanners who do have sufficient orders, the hide prices are certainly not the core problem. There is simply a lack of demand and a real balance in production and costing. Once again, without a general improvement and an increasing interest in leather as a material, it will remain difficult to achieve a fundamental improvement of the situation. A look at the cash flow in the chain is probably not bad advice in the coming months either.

In the end, all the programmes for March were closed, thus securing the flow of goods for the time being. However, no one is likely to be really satisfied with the results; any problem solved creates a new one. 

The kill: The kill recovered this week as expected. The numbers are still not particularly impressive, but the extremely deep dip that occurred around carnival time this year is fortunately behind us. The weather is still very wintry, which is why we are initially assuming that productions will not change much until Easter.

What we expect: We assume that this coming week will see a return to calm in Europe and that people will turn their attention to tasks other than hide prices for a time. Developments in China and other parts of Asia will remain influenced by the situation in the lime split market. Up to now, no one is talking about an improvement in leather demand. Quantities for the coming season are still insufficient. Accordingly, raw material purchases are filling production without really being covered by reliable leather orders. This makes the market situation extremely fragile and the line between optimism and pessimism narrower than ever.

Share this story: