Proposals for a potential peace agreement in Ukraine are attracting much attention. Any form of peace agreement, regardless of how painful the concessions might be, would initially generate a positive impulse for overall consumer sentiment in Europe. But how long any peace agreement might last remains to be seen. The biggest challenge will likely be restoring some level of mutual trust between all parties.

The war continues to weigh heavily on the consumption of leathergoods, and therefore a peace agreement could initially generate a noteworthy positive impulse for our industry. Reconstruction and a return to normal life in Ukraine would send a strong signal, and the lifting of sanctions against Russia would likely provide substantial momentum for the leather industry. However, it remains unclear who would ultimately benefit most and what the share of the European leather industry would be.

When looking at the current day-to-day realities, it is difficult to identify major changes in the market situation along the leather supply chain. Within the industry, the most notable event was the announcement that a well-known tanner in Austria will soon cease production at its site there. This will not surprise regular readers, yet it still carries emotional weight when a long-established and once successful tannery voluntarily decides to close a location.

Official and detailed information is still missing, but the measures for closure have already been initiated and are no longer a secret. The decision may have been easier for the owners because viable perspectives for employees and the property have apparently emerged, making the economic decision more straightforward. Nonetheless, the conclusion remains that closing the site was assessed as offering a better long-term outlook than continuing production.

When considering this decision as an example, it becomes clear that the long-term outlook is shaped not only by the current challenges in leather demand but also by other factors that forward-looking entrepreneurs must consider. Increasingly, arguments are emerging that go beyond the immediate European market situation. General conditions must also be taken into account: bureaucracy, energy costs, additional regulatory requirements, and the continuous migration of customers to other regions. In addition, many tanneries report difficulties in attracting qualified staff for technical and administrative roles.

It may be argued that some companies have not sufficiently prepared for this, but it is also true that it becomes more difficult each year to attract young talent to a career in a tannery. Training is also becoming increasingly challenging. The profession of tanner or leather technician requires the acquisition of varied hands-on experiences across many processes.

The growing industrial structure makes gaining such experience more difficult, and many processes are increasingly handled by chemical and machinery suppliers. The underlying craftsmanship and creative aspects of leather production are often overshadowed by process optimisation and automation. Furthermore, the availability of chemicals and machinery could also become a critical bottleneck in Europe, with many ideas failing simply because desired essential components are not reliably accessible.

This had long been an advantage of the Italian tanning districts, but according to young professionals from the region, opportunities are increasingly limited even there. True craftsmanship is now mostly practiced only in small or micro enterprises.

On a broader level, the situation regarding the European Deforestation Regulation (EUDR) cannot be overlooked. The European Parliament will soon have to decide whether to implement the regulation in its current form on January 1, 2026, or to postpone it by at least one year. It is difficult to imagine that the EUDR, in its present scope, is implementable for all products. Some member states’ belief that this is feasible remains puzzling. The discussion is no longer about substantive issues, which have been neglected for nearly a decade, but instead about principles, ideology and the political risk of losing face. For many small and medium-sized tanneries, the extensive documentation and verification requirements could lead to significant cost burdens and administrative overload like we saw already with voluntary certifications.

The Supply Chain Act also plays a role, as it highlights how the global balance of power has shifted. Europe’s preferences and expectations are increasingly disregarded by many trade partners. Insisting on strict European-only standards can have far-reaching consequences, including in areas such as energy supply, where many producing countries no longer feel compelled to adapt to European expectations. Without a significant degree of pragmatism, stabilising Europe’s economic development will be difficult in the coming years. The problems in the leather pipeline might be an indicator of this.

Many discussions continue to revolve around the future development of raw materials markets, with a particular focus on the bovine hide market. While slaughterhouses aim to stabilise and maintain the value of their by-products, many leather users question how long the current oversupply can be ignored. The idea that tanneries should receive hides for free as waste material is just as unrealistic as the assumption by meat producers that the situation is merely temporary. With declining leather demand, significant stock levels have accumulated at various stages of the supply chain, and many of these inventories cannot find buyers, even at minimal prices. Beyond weak demand, the lack of creativity in identifying new applications for leather as a highly successful and versatile material exacerbates the situation. Meaningful progress will require joint initiatives from leather users and tanneries.

One factor that has influenced the market more recently is the increasing use of bovine hides for protein production. What used to be limited to splits and trimmings now involves a substantial share of raw hides. This development is driven largely by growing demand for collagen, gelatine and hydrolysates in the food, cosmetics, and nutritional supplement industries. Leather production no longer needs to be an intermediate step; direct processing routes are increasingly being used, sometimes involving shared infrastructure with tanneries.

As a result, this sector has effectively set a floor under hide prices, preventing hides from becoming pure waste products.

In some regions, adjustments have already been made, as the flow of hides from slaughterhouses must be rethought and reorganised under these new conditions. It remains uncertain whether these changes will become permanent or whether the market will revert to old patterns. However, current information suggests that a return to prior structures is unlikely. This means that certain players in the chain must reconsider their role and positioning. A permanent diversion of part of Europe’s bovine hides into the protein sector would require structural changes to raw material flows, changes that are already normal practice in some other regions.

The market for splits remains somewhat inconsistent globally. In Europe, the market is very stable, driven by reduced leather production. Elsewhere, minor fluctuations occur, but nothing exceptional has been observed. The market is also shaped by the upcoming holiday-related pauses in production and shipping.

Sheep and lambskins have seen a certain liveliness for some time. While this has not led to significant price increases, growing interest, particularly in the Middle East and China, is evident. Prices for many types still do not cover collection and processing costs, which has led to lower raw material volumes entering the supply chain in the past. However, most surplus inventories have now been cleared, meaning processors can no longer acquire unrestricted quantities at any price. The market for coarser wools has also gradually recovered in recent years, and in many cases, wool revenue alone can now cover the cost of the accompanying skin. Demand for high-quality, specialty skins remains solid and can be observed in price movements. Furthermore, a consumer trend toward natural, durable materials in the home and fashion segments is providing structural support for these products. It is still too early to speak of a complete trend change, but the sense of hopelessness that has persisted for years seems to be easing.

The outlook for the remainder of the year will be strongly influenced by the further development of the war between Russia and Ukraine and the likelihood of any peace agreement holding. Beyond that, there are few signs of meaningful impulses for the leather supply chain. It is unlikely that leather manufacturers will place significant orders before the end of the year, and the same is expected for Chinese manufacturers in January. A possible exception could be a backlog of orders caused by regulatory uncertainty around EUDR, but this scenario appears unlikely. Additional uncertainties remain regarding energy prices, financing costs and exchange rate developments, particularly for the euro and the US dollar, which could affect the competitiveness of European leather producers, especially in the automotive and luxury sectors.

Closer attention will also be required for potential entrepreneurial decisions along the supply chain, starting with meat production and extending all the way to retail. For now, however, even small pieces of positive news are welcome.

Share this story: