After the summer holiday, we are now transitioning into anticipation mode. In Europe in particular, it has become almost normal to expect major events to happen immediately after the holidays. But they never actually happen.

The scenario for the next two weeks initially envisages the return of the leather industry in the Mediterranean countries next week. Added to this is the All China Leather Exhibition in Shanghai (September 3-5). It seems that fewer and fewer international exhibitors and visitors are attending this event. In terms of the international mood, there will be few impressions and reports to draw on, and the fair will become more of a national Chinese event.

Only a tour of the halls that are not reserved for overseas exhibitors will probably give an impression of what to make of the exhibition. It is conceivable that a lot of exhibition space could be occupied by exhibitors who are not directly related to the leather pipeline. Added to this, of course, is the question exhibitors attending only so as not to give a negative impression on Chinese industry. Let us not forget that the Chinese government is currently doing everything it can to stimulate local consumption, and negative perceptions of exhibitions that are essentially related to private consumption would hardly be beneficial. Entrepreneurs are well aware of what they should and should not do to preserve good will.

In two weeks’ time, we will be wiser. If we are lucky, things will turn out differently than expected and Chinese industry and the Chinese economy will once again be the catalyst for a trend reversal. Admittedly, it does not look like that at the moment, but we should not be completely negative. Why? First of all, many statistical figures in China are not exclusively negative when it comes to the leather sector as a whole. Car sales are developing very positively, and we know that leather, although not essential, plays a greater role there than in Europe, for example.

In addition, the Chinese stock market has developed very positively in recent months, and this has also been noted by private investors. The number of share portfolios is increasing again. For many years, only investments in real estate were attractive to investors in China because property prices had been rising steadily until the crash. After that, people were very cautious. As a result, there are now extremely high savings balances in China, and people are looking for investment opportunities. At the moment, the stock market is enjoying a certain degree of attractiveness again. 

A better stock market does not mean selling more leather products. However, Chinese consumers have always been very mood-driven in their consumption behaviour, more so than anywhere else. People are only willing to consume more again if there is more confidence in future prosperity. If the Chinese government can overcome this hurdle, the conditions would be relatively good. So here, too, we find ourselves in a state of anticipation, because the Chinese government’s further decisions and plans in October will certainly play an important role. We remain of the opinion that Chinese consumers are currently playing a decisive role for the leather pipeline.

In general, there have been no particularly significant events in the last two weeks, which was ultimately to be expected. Of course, there have been a number of political decisions and events, but these have not had a direct impact on our sector. The best news was the US president’s decision to suspend the increased tariffs on China for another 90 days. 

Otherwise, expectations remain unchanged. The coming weeks will see the usual signs of production picking up again and decisions being made about which new orders can be planned for the coming months. Decisions and information about this will probably not be available until mid-October.

Like it or not, leather remains a product that is very much driven by consumption, but it is not among most people’s basic needs. This means that sentiment plays a decisive role, not only in China but also in other regions. In Europe, the situation for additional and non-essential consumption is definitely not positive, for many reasons. 

If the overall economic environment is currently insufficient to trigger a noticeable and effective improvement in demand from consumers, then once again the only option is to convince manufacturers to increase their use of leather in finished products. Unfortunately, there has been no real change in the fundamentals here either. Of course, we have written many times about the success of some brands, but unfortunately there are few signs of this success spreading. The properties and value of leather should speak for themselves, but other factors still dominate the decision-making of potential users of leather in their products.

It remains completely inexplicable to us why it is not possible to agree on a common strategy in the leather industry. There is a need to move away from defending the material, sometimes seeming even to apologise for it. We should not always be discussing leather substitutes (and perhaps even fearing them). We should communicate openly that leather should substitute plastic. Plastic is rightly criticised; other products that do not use fossil-based raw materials are not really usable at scale, and this should leave the door wide open for a renaissance for leather.

However, if we focus our efforts in the wrong direction and continue to devote more energy to certifications and audits that bring no increase in the use of leather, it will probably become even more difficult to fight the general trend. 

The huge obstacle remains the fragmentation of the global leather industry and the fact that, despite all the lip service, it is not possible to agree on a central strategy with a focus on the consumer. Unfortunately, all efforts in recent years to successfully position the value, production, sustainability and upcycling process in the market have not yet borne fruit. Without this, however, it will be difficult to prevent further shrinkage and decline in the production and use of leather. We would be delighted if someone could prove us wrong. However, the facts of recent years tell a different story.

Leather will of course continue to be produced and will probably become more and more of an exclusive niche product. Without question, there are still many people on this earth who love the product and want to take advantage of its superior properties. When crisis causes people to place greater importance on value for money again, those who are aware of this will certainly opt for more leather. All of this points to a continuation of the trend towards fewer, larger, more dominant mass manufacturers and, at the same time, probably a renaissance of smaller clusters of specialists. While some may be able to face the demands and costs of certification programmes, others will certainly have to leave these systems behind.

Relatively little has happened in the raw materials markets in recent weeks. The only thing that can be said with certainty is that weak demand continues to weigh on prices. Another problem, and not a minor one, is the fact that market transparency is continuing to decline. Even though those involved naturally have no interest in much of this becoming public knowledge, it is nevertheless possible to ascertain, even without official documentation, that there are considerable price differences for the same goods. Volume and financial security currently enable some large players to purchase what we might call special conditions. Any additional, smaller demand is then met at correspondingly different prices, although the total volume is very small and so is the leverage for the sellers.

In any case, the large producers with orders are not failing at the moment because of the price of raw materials. With a few exceptions, slaughter levels worldwide are currently rather low, which can best be seen in the numbers in the US. Demand for beef remains relatively stable, despite customs duties. This is leading to significant shifts in the flow of goods. It also takes a certain amount of time before this can be seen in the markets as a whole. This is particularly true because there is also an oversupply of hides and skins. Especially in countries of origin that cannot necessarily offer the best quality for leather production, the possible destinations for the raw material are further and further away.

On sheep and goat skins and split leather there is no real news. In the case of skins, their use for leather in niche markets has now become fully established. They exist, there is also a reliable flow of goods and demand, but away from these niches, the skins are no longer being used in leather production and can only be used in very marginal quantities for proteins or other sectors.

With split leather, there is a two-fold problem. On the one hand, there are fewer lime splits, which are needed for very specific end products. On the other hand, whole hides can increasingly be used for protein without any problems. Here, too, the coming months will determine how the flow of goods is to be reorganised.

Forecasts or assessments about the near future cannot and should not be made. There is simply no real factual basis for this. We know that there are some market participants, especially in the raw materials sector, who are predicting a sustained market improvement and are betting on it. Perhaps they are right. If you repeat an opinion often enough, it will probably become true at some point. However, those who have expressed this opinion frequently in the past have had to admit that they were wrong and the same thing could happen again. Of course, market opinion is currently also strongly driven by individual interests. 

We will follow events in Asia with great interest and then we will probably have to wait for the gathering in Milan for Lineapelle (September 23-25) to get a final picture. Until then, we honestly do not believe that there will be enough new facts to justify a significant change in the market situation that has prevailed for months now.

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