In recent weeks, the number of questions in the leather pipeline has grown faster than the number of answers. That may be the best way to describe the current situation. There is still movement, individual markets are still functioning, and in certain areas demand can still be heard. Nevertheless, the overall picture has become noticeably more uncertain. The market does not feel like a market that is simply becoming seasonally quieter, but rather like a market that has to deal with a very large number of open issues at the same time.

The geopolitical situation, and especially the situation in the Persian Gulf, is currently playing the decisive role. This is not just a political crisis somewhere in the world, but a situation that can very quickly have direct effects on energy supply, energy prices, transport costs, raw material supply, inflation and ultimately also consumer sentiment. In addition, the situation in the Persian Gulf is also highly relevant for the availability of intermediate products used in the manufacture of many goods. This includes tanning materials, chemicals and other products required for the manufacture and finishing of many leather products. Any disruption in this area would therefore not only affect general industrial costs, but could also directly influence the availability, timing and pricing of materials needed within the leather pipeline, and so production itself.

So far, hope still dominates in many areas. The hope is that the situation will not escalate further, that energy supply will remain stable, that transport routes will not become even more expensive or slower, and that consumers will only postpone their purchasing decisions rather than cancel them altogether. This hope is understandable, but it is not a reliable market strategy. The clock is ticking because the leather industry has a long pipeline. What is not ordered, produced or prepared today may be missing later exactly when certain articles are needed again. At the same time, almost nobody wants to take too much risk at the moment. This means that purchasing is becoming increasingly narrow, increasingly cautious and increasingly focused only on specific articles or existing orders.

Europe and Asia in particular are strongly affected by this situation. In Europe, the leather industry continues to suffer from high energy and production costs, weak consumer sentiment and a generally very cautious retail environment. From many of the European centres of leather production, feedback remains mostly negative. Order levels remain below average, and even though not everything has come to a standstill, the market lacks breadth. There are functioning supply chains, individual specialist markets and, of course, companies that can still serve their niches. But this does not change the fact that the general mood remains weak.

For consumers, the current focus is less on new furniture, a car, a high-quality bag or other major consumer wishes, and more on short-term spending and the summer holidays. This is particularly relevant for the coming months. If the current global situation also puts air travel, fuel prices or holiday budgets under pressure, the effect is negative in two ways. On the one hand, there is less money and less confidence for other consumer goods. On the other hand, tourism itself is an important driver of many leathergoods sales. If people travel less, or if travel becomes more expensive and more uncertain, this also affects demand for products that are closely linked to international consumption, including shopping at airports, in city centres and in tourist areas.

The officially available business results from the leather industry for 2025 delivered very few positive signals. Many companies had a difficult year. The start of 2026 has not created the impression that a rapid and broad recovery is now ahead.

The picture in China also remains difficult. The weak real estate market has been weighing on demand for furniture and other durable consumer goods for some time. In addition, a weaker automotive market gives little reason for optimism regarding leather demand. When real estate and cars are both weak at the same time, two very important end markets for leather and leather-related materials are affected. As a supplier industry, the leather sector always feels such developments with a certain delay. That does not make the situation less serious; on the contrary, it often makes it harder to assess. Immediate demand may still be supported for some time by old orders, existing inventories or ongoing programmes, while the actual weakness only becomes visible later.

The market for luxury leathergoods is also weakening. Externally, many major brands continue to project strength, exclusivity and stability. That is, of course, part of this market. But internally, and among market insiders, it is clearly visible that demand for very high-priced products is no longer as self-evident as it was in recent years. The upper middle class in particular, which had been an important growth driver for many luxury brands in recent years, is buying more selectively. If the super-rich buy ten or 100, or even 1,000 handbags each, it may sound spectacular, but it would only change industry volumes to a limited extent. For the leather pipeline, the decisive factor is not how high an individual sales price is staged, but how broad and regular real demand is.

The fashionable mid-range segment can partly benefit from this. Brands that are strong in fashion terms but positioned below classic luxury have been able to absorb demand in some areas over the past few months. For leather, this is generally positive because fashion can still create demand. At the same time, this segment is much more price-sensitive. It does not accept rising raw material and processing costs without limits. It would be particularly critical if the market for second-hand and vintage products were also to weaken. As long as high-quality used products perform well, part of the consumer desire is satisfied outside new production. If this market loses momentum, pressure on new products could increase, but not automatically at prices that are satisfactory for manufacturers or raw material suppliers.

A central problem remains the increasing narrowing of demand to focus on very specific raw materials, qualities and articles. Buyers are trying to purchase only what is directly needed for a concrete order or a concrete end product. From the buyer’s perspective, this is understandable, because nobody wants to build unnecessary inventory or price risks in this market environment. For a raw material such as hides and skins, however, this development is problematic.

The raw material does not arise according to a wish-list. Size, quality, substance, grain pattern and assortment structure are determined by nature, origin and slaughter. If downstream demand only looks for a very narrow selection, the rest of the assortment becomes harder to place. This is one of the biggest structural tensions in the industry. Without a solution for all hides, there can be no truly satisfactory outcome for the overall use of the raw material.

In this context, the possible shift in supply chains within the continental European meat industry should also be observed. Netherlands-based meat company Vion has sold three large cattle slaughterhouses in Germany to different buyers. This does not necessarily change the fundamental balance between supply and demand for raw material immediately, but it may have a medium-term influence on goods flows, collection, sorting and marketing. At the same time, ownership structures among contract tanneries may also be changing.

Here too, the point is not that there would suddenly be more or less raw material. What matters much more is who controls the raw material, where it is processed and what role regional specialities, particular origins and high-quality hides will play within the processing chain in the future. Especially for special hides from the region, the place of processing may be more important than it appears at first glance. Nevertheless, it would clearly be too early today to draw concrete market consequences from this. The actual effects will probably only become clearer in a few months, or possibly not until 2027.

In addition, the use of hides, skins and by-products continues to shift. The area of further protein production, meaning collagen, gelatine and related applications, continues to absorb volumes and is gaining importance. This helps in certain areas because it creates a use for raw materials that have become more difficult for leather production. At the same time, this sector has clear price limits.

Directly from the slaughterhouse, such use can make sense. However, as soon as additional collection, sorting, preservation, transport and preparation become necessary, the question very quickly arises as to whether it is really economically worthwhile. Of course, it will be argued that investment is being made in this area and that new capacities are being created. In the end, however, it is not the investment itself that decides, but the actual value creation that can be achieved with the raw material.

In the United States, the current legal dispute over tariff policy has temporarily opened an interesting window for the import of high-quality leathers. For specialist markets such as aircraft interiors, high-quality furniture or other technical and demanding applications, this can certainly be relevant. Some importers could benefit in two ways: on the one hand through possible refunds of tariffs already paid, and on the other hand through pull-forward effects in the procurement of higher-quality European materials before new decisions may be taken again. However, this should not be confused with a genuine increase in demand from US consumers. It is more a matter of tactical procurement. 

The market for garment leather is also in a difficult situation. On the one hand, fashion trends are supporting demand for leather clothing. Certain articles, especially in sheep, lamb and goat, are in stronger demand again. On the other hand, many manufacturers have obviously still calculated on the basis of prices from previous years. These prices, however, were often not realistic. They were the result of extremely weak demand and the sale of inventories at prices that in some cases did not cover costs. The low prices of recent years did not necessarily reflect the real value or the actual preparation costs of the raw material.

Now several factors are coming together. Wool prices are rising, fashion demand is supporting certain qualities, and at the same time supply is not available in unlimited quantities at old prices. This means that many enquiries can be heard in the market, but they do not find real coverage in available supply. In other words, demand is there, but often not at prices at which sellers can or want to supply realistically. Buyers are still orienting themselves around the old deflationary prices, while sellers have to pay more attention to replacement costs and alternative uses. This makes the market active, but not necessarily healthy.

In the split market, the picture has changed little compared with recent months. The market for collagen and gelatine continues to absorb satisfactory volumes, even though prices in China have recently been rather weaker owing to softer demand. For splits used in leather production, fashion continues to support certain articles, meaning that the price situation has changed only slightly. Nevertheless, a trend seems to be slowly emerging that could work more against split as a material. This is not yet an abrupt change, but it should be monitored. If certain end markets once again place greater emphasis on material perception, transparency or higher-quality alternatives, split could come under greater pressure in the medium term.

In addition, we are seasonally in a typical phase for spring and early summer. Demand for leather production is declining in many countries simply because of the calendar. Public holidays, shortened working weeks and then the summer holidays interrupt production and slow down decisions. China and India often run somewhat ahead because of longer lead times, but in general there is little reason to expect a real revival before August. This does not mean that the market will come to a standstill. But it does mean that the coming months are likely to be shaped more by caution, selective buying and risk limitation than by a broad recovery.

The decisive question is therefore not only whether there is demand somewhere. There is almost always demand in individual areas. The more important question is whether this demand is broad enough and realistic enough in terms of price. At the moment, there are doubts about that. Good qualities for specific technical, fashionable or high-value applications remain in demand. Everything outside these narrower demand windows is becoming more difficult.

The leather industry continues to move, but it moves selectively. And the more geopolitical risk, energy prices, consumer uncertainty and narrow purchasing logic come together, the more difficult it becomes to achieve a real market recovery, even if there are individual positive signals.

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