Not much has changed in the overall situation along the leather supply chain in the last two weeks. How could it, as we are currently almost exclusively influenced by external events? Everything is currently influenced by the expectations of the various individual negotiations regarding the US government’s trade policy. Without definitive decisions, not much can change in the situation. Of course, this applies not only to our sector, but to almost all sectors in what is now a globally networked economy.

There is no doubt that even agreements that may be reached in the coming weeks will hardly be able to heal the fundamental damage that has been done very quickly. In addition to the damage that has already been caused by disruptions to the supply chain, the loss of trust in politics, and in particular in US politics, may well continue to have an impact for a long time to come. This may no longer be reflected in the media headlines, but every company that is involved in international trade needs to think about how it can reduce its risks and dependencies in the coming years.

Certainly not an easy task, considering how the geopolitical situation is affecting life at the moment. To make matters worse, an escalation in the tensions between India and Pakistan has led to the worst fighting in years there in recent weeks. A ceasefire is in place but seems fragile.

Aside from the geopolitical situation, the industry has had other sad news. First, there was the complete destruction of the beamhouse and tanning section in a fire at ECCO Leather in the Netherlands. In this case, the entire building had to be completely abandoned to the fire.

Almost at the same time, the news arrived that the leather factory, Vitelco, also in the Netherlands, will also close in the near future because the conditions for continued operation can no longer be justified. As the site can at least continue to be used for residential purposes, at least a sensible future use is guaranteed. Production will probably cease this summer. 

This means that two large calfskin production facilities north of the Alps will disappear. Of course, there is enough free alternative capacity, but the transport routes are getting longer and so is the administration of the supply chain. Of course the suppliers are able to solve these issues, but it is still not good news. 

We have not yet been able to find out whether the Ecco Leather factory in Dongen will be rebuilt and become available again. But this would take a lot of time.

Alongside the bad news, however, there was also good news. It has now been officially announced that Pasubio has acquired two leather factories outside its core business. The reason given is an expansion into the leathergoods sector and it may also have to do with the acquisition of additional technical expertise. Considering the problems in the leather industry, this decision is quite remarkable. Pasubio is owned by a large private equity investor. One must therefore assume that, in this is the case, the private equity investors are confident of achieving growth through these acquisitions. This can only testify to a high level of basic trust in the material and the future of leather. Reports say that further investment opportunities in Tuscany and the leather industry have been looked at and that a number of other takeover candidates have been identified. It looks from this as though some have no fear for the future of leather in general and production in Europe in particular. If the big money still sees significant potential for returns in this sector. 

Considering the very extensive investments already made by luxury goods groups in the leather industry in Tuscany and if further takeovers are indeed on the horizon, it must also be borne in mind that the creative, flexible, owner-managed structure of the leather industry in Tuscany will change. It will be a very exciting topic to see whether the idea of ‘from small, make big’ will become a success story. To date, the big dinosaurs of the industry have tended to be the victims. The list of large companies that failed in the 80s and 90s is quite long. Size has always been more of a burden in the leather industry in Europe and, as always, individual exceptions prove the rule.

It is hard to talk about the leather industry at the moment without discussing the impact of tariff tensions, between the US and China in particular. First of all, the tariffs are a burden on trade in general. Agricultural goods, including cattle hides from the US, are suffering in particular owing to their high dependence on sales to China. Let us not forget that around 30% of cattle hides find their way to China and for certain types, such as cow hides, it can be up to 90%.

For the meat industry, this is more of a logistical challenge than a real economic threat, it is much more dramatic for those who have to make their business success solely from the collection and processing of hides. In addition to the losses that already result from the pending contracts, for many there is hardly any cost-covering revenue for the goods. Either the lack of revenue is borne by the slaughterhouses, or other possibly cheaper alternatives have to be chosen for the disposal of the hides. Of course, this also means that if the situation continues for too long, entire infrastructures will no longer be available in the future. At the moment, however, the industry is having to deal with the consequences of the fall in the price of US hides.

This fall in prices has been significantly exacerbated by the tariffs. In a phase of weaker demand for leather and before the summer, it is not so easy to find new customers for hides destined for China, and potential buyers in other countries can also do the maths. However, this means that those who now have both the courage and the financial resources to lower the average cost price of the raw material will initially have a much better basis for calculation than their competitors, who cannot or do not want to reduce their prices in turn. Of course, this only applies to leather factories that rely on US hides. The only question here is whether it may be necessary to prepare for more and general price pressure owing to a general trend.

On the other hand, a similar scenario also applies to many finished leather products that came onto the US market from China. Here too, the tariffs have brought business to almost a complete standstill. What is of course dramatic for the suppliers and producers in China on the one hand, but it is also causing a supply bottleneck in the shops in the US. For shoes and furniture, the proportion of deliveries from China is not insignificant. Of course, solutions and alternatives are now being feverishly sought, and of course they do exist. The problem is not so much one of capacity, but rather of redirecting the supply chains, which could have considerable consequences for the future if the changes actually take place. You don’t just jump back and forth, and if China and the US do not reach an agreement in the short term, this will probably have very far-reaching consequences for the leather and processing industry in China. There is probably still time, but basically it has to be said that the clock is now ticking very quickly. We are hearing from many sides that some countries are promising good opportunities. Of course, here too, everything depends on the future tariff policy of the US.

We note reports on May 12 of a temporary agreement between the US and China. Tariffs are to be reduced for a period of 90 days. Although this would break the almost complete blockade of trade for a time, it can certainly not yet be seen as a solution. Agreements with many other countries are still missing and, above all, it will not restore the trust that has been destroyed.

It is easy to see how crucial customs policy will be for the future of the majority of the leather industry. For many companies, the time factor will also play a decisive role, as the decisions for production in the second half of 2025 will have to be made within the next six or eight weeks. Tariffs or no tariffs, the world will not stand still and people in the US also want to and will continue to buy products. The only question is where they will come from, what they will cost consumers. Here, too, it is important to remember that US consumers may have to calculate their budgets completely differently in the future and may therefore spend significantly less money on leather products.

There is also not too much to report about the split market at the moment. On the one hand, there is a lack of material because the leather industry is currently producing significantly less. On the other hand, who cattle hides that can replace split from the leather industry are becoming cheaper and cheaper. This, too, will have consequences and may even fundamentally change the situation. This is not to be expected in the short term. At the same time, the market for collagen remains a pillar for the sale of hides that can find their way directly into this application. Here, too, the current situation is in favour of new market conditions and here, too, the players have to make a decision. However, for once this has much less to do with trade policy. This is more about the availability of raw materials, strategic decisions about locations and the costs within the production chain.

There is not much new to report on sheepskins, lambskins and goatskins either. Here, too, the situation in China is having an impact and, as notorious optimists, we can only conclude that at least the high-quality niches and specialities are still operating quite successfully. We would even go so far as to say that we have the impression that people are increasingly focusing on speciality items again.

Making any forecasts for the future at the moment still seems relatively pointless to us. Obviously, the US is currently negotiating individual agreements with a number of countries. Nobody can predict today to what this will lead. One thing is certain, however, and that is that individual agreements with individual countries could potentially have very far-reaching effects on the leather supply chain. It is simple and very obvious that the next decisions between China and the US will be of particular importance. It is not only the leather industry that is important here, but also the earnings of US farmers, who are also very dependent on exports to China and Asia.

It should also not be forgotten that there are other countries, particularly in Asia, that are also very important for the leather industry and that differences in the timing of negotiations alone can have a major impact in the short term. In the same way, new news can very quickly overtake our analyses.

Share this story: