This week: Not much has changed. Holidays at the end of last week in China for the Dragon Boat Festival, and at the beginning of the week in the US for Emancipation Day led many to take an early-Summer break.

There were no major events that might have required quick decisions. The fact remains that the period from June to September usually requires no big decisions in either retail or manufacturing. In the northern hemisphere, people are essentially in holiday mood and production is for existing orders.

This year, at least in Europe, the situation is additionally burdened because demand and the general consumer sentiment are bad and, in addition, there are still very large stocks of consumer goods that first have to find customers. At least in Germany, until a few weeks ago you could actually find very few special offers, but that has changed considerably in recent weeks. A number of retailers have had to file for bankruptcy and the consumer mood has not improved; many retailers have now decided not to wait any longer and to try their luck with big discounts. Whether this will trigger the big stimulus to empty the warehouses will probably only be known after the holiday season.

In the meantime, German car manufacturers have worked through their order books, which were still well filled from previous years for the less pricey models, and are now looking with great concern at the significant drop in new orders.

Many of the problems are very German (or perhaps European), but at the moment it doesn’t look as if export business will be able to compensate. In leather production, all this has produced great concern. A quiet summer phase might seem normal, but there is a lack of hope and conviction that things will pick up again quickly and strongly after the summer.

In addition, there are many other problems: costs, labour, ever-increasing bureaucracy, official requirements and the question of how the local supply of raw materials will continue in the next few years. These are paralysing investment decisions and creating a pessimistic environment in Europe.

In the other regions of the world the situation is certainly not quite as bad, but an overall positive optimistic environment is not to be found there either at the moment. The recovery in China is sluggish and not developing much momentum.

Nevertheless, it is the tanners in Asia who are still providing some stimulation and activity. Even though the situation regarding import licences for German hides at two Chinese ports has still not been clarified; one assumes that it will be clarified in the short term and that customers are also prepared to continue buying. If one is prepared to offer additional deals at the prices of the last few weeks, there will always be someone who will accept small quantities.

In Europe, lime split prices are now also playing an important role and will probably drop significantly in the next quarter. The market for collagen and gelatine simply cannot be served with the prices for splits from the winter half-year. It is not so much the current declines as the inflationary prices of last winter that are only now being corrected. For the leather industry, this means a strain on calculations, as we have seen before in China.

The kill: The beef business remains a problem. Sales volumes are unsatisfactory and despite the lower prices for live cattle, the market simply cannot find a healthy balance. Exports to southern Europe and a fairly active business with restaurants and catering are offset by sharp declines in meat demand in the food retail sector. Production capacity, the price structure for the various cuts and demand have simply not yet found a balance.

What we expect: Eyes remain on the markets in Asia. In Europe, it is clear to everyone what is still needed in terms of raw materials before the holidays in mid-July and who will probably buy or sell them. The quantities are quite manageable. In Asia, leather manufacturers are aware that prices will not drop significantly any more. So, if you believe in your business, you buy wisely, or you wait for opportunities to find so-called ‘bargains’ with suppliers who urgently need sales. The fear that one might not be able to buy enough raw materials in the next few months and that one might be forced to pay significantly more does not exist at the moment.

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