This week: Attendance at the Lineapelle exhibition in Milan last week turned out to be higher than initially feared. And the visitors who went were the kind that justify the trip to the fair for exhibitors. As is so often the case with trade fairs, it is less about the number of visitors and more about their influence on market dynamics. Above all, it is about how much genuine interest they generate at exhibitors’ booths.

Our main takeaway was the sense that most exhibitors were quite satisfied with the quality of visitors and the conversations they had. More broadly, we returned home with the impression that the range between positive and negative sentiment was probably wider than we have experienced in all the decades we have been attending.

It cannot be emphasised often enough that this fair is, at its core, a showcase for tanneries that focus on producing leather for footwear, apparel, and leathergoods. What else stood out? Encouragingly and somewhat surprisingly, leather is clearly regaining relevance and interest in certain segments. This is particularly true for the long-neglected apparel market, and even in footwear there appears to be a renewed appreciation for the original material. That said, it would be wrong to assume that this already marks a decisive breakthrough in mass markets. Those decisions are made elsewhere. But Milan is often where such developments begin to surface.

Another clear trend was that leather is, in many cases, beginning to free itself from the dictates of fashion. For many years, leather was primarily a “fashion” and image-driven product, rather than a material valued and used for its intrinsic properties. Leather served as a tool to elevate products, rather than because it has characteristics that synthetic alternatives cannot match; it was simply an image enhancer. Here too, it is probably far too early to speak of a true turning point. Still, these are the first genuinely positive signs we have seen in quite some time.

In addition, many exhibitors reported that for the first time in a long while they could once again talk about new products, new colours and additional applications. In some cases, companies have begun to emerge from a long period of purely defensive positioning. However, many of the economic challenges have by no means been resolved. Price pressure remains, and cost stress for European manufacturers persists as well. These issues particularly affect the large mass producers of standard leather in Europe, companies that, in theory, should benefit from economies of scale. Those advantages are simply not sufficient when compared with their competitors overseas.

Another unresolved long-term issue is that for the various selections inevitably generated in leather production, there is still neither enough market potential nor economically viable outcomes. This leads to fundamental questions along the supply chain: who takes on which risks and who is ultimately able to carry them? From a business perspective, there was little that was fundamentally new.

The hide types that attracted the greatest attention in the past were once again in focus in Milan. Heavy bulls, specific calfskins and so on. Specialties for apparel and suede remain in demand also, suede splits and hides for footwear leather with a reasonable price–quality balance found buyers at largely unchanged price levels. By contrast, hides that can be easily substituted with other, cheaper raw material face a much harder time finding a home. The same applies to raw material that does not fit tight specifications in terms of weight and size, whether they make sense or not.

The lack of flexibility and creativity in the leather industry and among its customers remains an unresolved and frustrating problem. If we had to summarise the days in Milan in one sentence, we would say this: we came home with a better feeling than we had when we set off for Milan.

The kill: Slaughter numbers continue to show little movement. There are no truly convincing arguments as to why. Cattle prices are certainly very high, demand in food retail remains price-sensitive, and of course the carnival season plays a significant role for beef demand and therefore slaughter activity. At some point, however, something has to give, because slaughter volumes and herd levels currently do not seem to align. For now, farmers appear neither forced nor genuinely willing to release more cattle. At the same time, slaughter will naturally only occur to the extent that the end product can be sold successfully in supermarkets. Next week will again be influenced by carnival, and only afterwards will it become clearer where things are heading.

What we expect: The market is certainly not yet at a point where the leather industry feels strong pressure to actively procure in the spot market, let alone to think about longer-term coverage of raw material needs. The prevailing sentiment is still that more raw material is looking for customers than customers are looking for raw material. For the mass market, that is undoubtedly true. But in the first small niches, the wind could soon shift, especially if the industry continues to avoid addressing how shortages might be balanced sensibly against surpluses. The good news is that economic logic ultimately exerts the necessary pressure to prompt alternative solutions. It would not surprise us if this gains importance in the coming weeks or months, if ‘the fashion effect’ fades and the ‘performance factor’ gains. 

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