The worldwide picture is not completely uniform. Brazil has significantly increased its beef production during recent years and has temporarily overtaken the US as the largest producer, while at the same time the US cattle cycle and first forecasts for Brazil indicate that the availability of cattle for slaughter could become tighter again in important production regions outside Europe during 2026.

A lower kill would generally be positive for the raw hide market, but supply alone does not create demand. As long as leather production does not increase, lower slaughter volumes only mean that less raw material has to be distributed in a market that remains weak. It does not solve the real problem, which is the lack of orders for leather.

The sales situation for raw cattle hides therefore remained difficult during the last few weeks. Bids continue to come from China and other parts of Asia, but they remain strongly price-driven and concentrate either on very cheap commodity material or on the special qualities required for specific applications. An increase in Chinese raw hide imports should therefore not be confused with a fundamental improvement in the leather market. At the same time, China has significantly reduced its import duties on wet blue in 2026. This makes imports of semi-finished leather more attractive and possibly creates a further incentive to carry out the early production stages in those regions where energy, labour, chemicals, environmental costs, avoidance of duties and the final sales market can be combined more favourably.

For European leather producers this makes a fundamental question even more urgent: which production stages can remain competitive under the existing cost conditions in the long term? Labour, energy, financing and regulatory costs are high, while capacities are in many cases not sufficiently used. In such a situation, losses are not necessarily created by the purchase of the raw material, but mainly by the fixed costs of unused plants, long production cycles, high inventories and the need to keep a wide range of qualities and colours available for customers who themselves are planning on an increasingly short-term basis.

The obvious economic reaction is to reduce production, specialise more strongly, combine production sites or finally transfer individual production stages to other regions. This is not a problem limited to the leather industry but can now be seen across large parts of European industry. The European textile and clothing sector already recorded its third consecutive year of falling production, turnover and employment in 2025. Further textile production companies are closing in Europe every week. The automotive industry, which remains of central importance for large parts of the European bovine leather sector, is also experiencing cyclical weakness and is obviously going through a structural transformation. European automotive suppliers announced the loss of a total of 104,000 jobs during 2024 and 2025 alone. At Volkswagen, a considerable reduction in capacities, fewer model variations, extensive job cuts and plant closures are now being discussed. Whether all these measures are implemented remains to be seen, but the scale of the discussion alone shows how serious the situation is.

For the leather industry this is of considerable importance. Fewer vehicles produced initially mean fewer seating surfaces required. At the same time, automotive manufacturers are trying to reduce the number of variations, lower purchasing prices and standardise materials to a greater extent. Leather is therefore not only competing against other leathers, but against coated textiles, plastics and new composite materials, which are easier to plan in industrial production, offer a more predictable cutting yield and provide more uniformity. Under strong cost pressure, the question is not which material is fundamentally of higher quality, but which material fulfils the required technical standard at the lowest total cost.

A similar situation can be seen in the furniture sector. European furniture production has continued to decline, while demand in 2026 is expected to remain almost stagnant. At the same time, imports of upholstered furniture from countries outside the EU have moved close to their previous record levels. European upholstered furniture manufacturers are therefore facing double pressure from weak demand and lower-priced imports. Here as well, there is a risk that either the complete production or at least the labour-intensive production stages will be transferred to regions where costs are lower. This does not only concern sewing and upholstering, but indirectly also the sourcing of the materials. If the furniture is produced in Asia, North Africa or Eastern Europe, it is less likely that the leather will pass through several additional transportation and processing stages in Western Europe, unless there is a particular quality-related or brand-related reason for doing so.

World trade in footwear also weakened at the beginning of 2026. European production can only compete to a limited extent through price and is therefore trying to defend itself through automation, flexibility, proximity to the sales markets or a clearly higher-value positioning. Portugal is a good example of this. Parts of the Portuguese footwear industry are specifically investing in technology and higher-quality products because competing with Asian mass production on price alone is difficult. At the same time, European footwear production has fallen by approximately 20% during the last ten years.

Basically, the same rule applies to leathergoods, footwear and clothing: production remains in Europe where it has to be fast, flexible, technically demanding or necessary for the credibility of the brand, or where it creates sufficient additional value to justify the cost difference. Standardised, labour-intensive production which can easily be transferred will remain under considerable pressure.

The current situation can therefore certainly become a threat to the existence of parts of the supply chain. The middle of the market is particularly exposed: this means producers who have neither the lowest costs and largest volumes, nor unique quality, technical competence or strong customer relationships. Large companies can react through volume, automation and purchasing power, while highly specialised manufacturers can sell particular qualities at corresponding margins. Anyone offering a relatively interchangeable product at European costs is increasingly being squeezed on both sides. This applies equally to hide dealers, tanneries, finishers, component manufacturers and producers of finished goods.

At the same time, one should be careful with the assumption that a recovery of the luxury market will automatically solve these problems. The results of the major luxury groups currently show a clear polarisation instead. Sales in LVMH’s leathergoods division declined by 2% during the first quarter of 2026. Kering recorded a comparable reduction of 3% in leathergoods, with Gucci, the group’s biggest brand, down by 8%. Hermès, on the other hand, achieved growth of 9% in leathergoods and saddlery. This means that there is still very strong demand for special, desirable and credibly positioned leather products. It does not mean, however, that the luxury market as a whole will return to its previous growth rates or absorb sufficient volumes to support the complete leather supply chain. Current forecasts for the personal luxury goods market in 2026 are only expecting growth of approximately 2.5% rather than the higher rates of previous predictions.

The opportunities therefore lie less in a general return of the old volumes but rather in a consistent concentration on products with strong desirability, recognisable design, credible origin and long-term value. This is exactly where the major difference between the position of leather in the mass market and its position in the niches becomes visible. The mass market is based on industrial production, reproducible processes, high speed and massive price pressure. Leather, on the other hand, is a natural material with variations in area, structure, thickness, colour and cutting yield. It requires experience in selection, cutting and processing, ties up capital and cannot simply be calculated like a standardised material supplied on rolls.

Under the current conditions, mass manufacturers, mass-market brands and retailers therefore have little reason to voluntarily return to a more complicated material. Low raw hide prices alone do not help. The experience of recent years clearly shows that the former cycle, according to which footwear and leathergoods manufacturers automatically returned to leather when hide prices declined, no longer works reliably. Many manufacturers have already adapted their products, machinery, supply chains and calculations to other materials. In contrast, leather continues to hold an extraordinarily strong position in high-quality niches. Its touch, ageing characteristics, repairability, patina, individuality and connection with craftsmanship are difficult to replace with standardised materials. The problem is not so much that leather has lost these qualities, but that fewer and fewer consumers know them, can differentiate between them and actively demand them when making a purchase. Consumers who have never learned how good leather feels, how to distinguish tanning, grain and workmanship or how to recognise the difference between a durable product and a coated surface will inevitably make purchasing decision mainly on the basis of design and price.

Awareness of leather cannot therefore be restored only through defensive discussions about sustainability or technical information from the tannery. It has to be created through the finished product. Brands and retailers will have to explain why leather was used, which quality was selected, where the material came from, how it will age, how it can be maintained and repaired and why the higher price is justified over the lifetime of the product. This information must be available in the shop, on the product page and on the product itself. Material descriptions must become clear and understandable, sales staff must once again be able to explain the differences, and designers must treat leather not only as an interchangeable surface but as the starting point of the product. Transparent information about origin, repair and care programmes, guarantees, demonstrations of craftsmanship, cooperation with designers and craftsmen, limited product series and a stronger connection with the second-hand and resale markets could all be possible options.

A recent example from China shows another possible direction. There, an upstream material producer is cooperating directly with a fashion designer and using a major fashion event not only as a runway presentation but as a platform to demonstrate how material competence can help to convert a creative idea into a realistic commercial product. The concept includes a broad range of materials, but the important point is not simply the number of articles offered. The materials are selected according to silhouette, drape, surface and the story of the collection, while at the same time considering whether they can be sampled quickly, produced at scale and used for apparel, footwear, bags and accessories at different price levels. The supplier therefore is not only somebody selling material, but a development partner providing early material consultation, jointly developed textures and finishes, rapid sampling and a clear route from the first runway idea to commercial production. Responsible manufacturing, compliance requirements and the ability to supply internationally are included from the beginning instead of being discussed only after the product has already been designed.

Such a concept is certainly no guarantee for commercial success. A collection can still fail, consumers can still reject the finished products and even the best material development cannot create demand on its own. Nevertheless, these ideas are clearly pointing in the right direction because they connect material knowledge, creativity, industrial feasibility and the market at a very early stage. And they are scalable.

It is also quite remarkable that such an example is currently coming from China. While large parts of the European leather industry continue to discuss certificates, audits, regulations and the reasons for declining demand, Chinese companies are apparently trying to become more deeply involved in the actual product development process and to make themselves relevant not only as suppliers but as partners to designers and brands. Whether the individual project will finally be successful is almost secondary for the general conclusion. At least somebody is trying to create new applications and new products instead of simply waiting for the old demand to return.

This is precisely the kind of approach which the leather industry needs more of. Most importantly, the consumer must once again be able to see, touch and experience the material. An abstract campaign by the leather industry alone will hardly be sufficient. The laws of the market remain simple: if using leather is no guarantee of additional sales, higher margins or clearer differentiation for brands and retailers, they will continue trying to avoid the material. Only when the consumer starts specifically demanding leather again will the decisions of those developing, purchasing and selling products begin to change.

Until then, however, the current situation remains dominated by the summer slowdown. Existing systems are being reduced, orders are only placed against immediate requirements, inventories are avoided wherever possible and major strategic decisions are postponed until after the holidays. More audits, certificates and lukewarm, interchangeable sustainability marketing have hardly contributed and will probably not contribute to solving the problem, and may even make it worse. It remains a misconception that more explanations, complicated transparency information, certifications and similar measures will do anything for a product such as leather. You simply have to like it and want its advantages, and then you buy it. It is as simple as that.

For the first time in quite a while, clear changes are becoming visible in the split market. While stronger resistance against the achieved raw material prices had already been developing in Asia for some time and demand there was calming down, this development has now also reached Europe. Apparently, this has taken some market participants by surprise, and the timing immediately before the summer holidays is anything but favourable for the market. Basically, the assumption had been that demand for splits from the leather industry would continue without interruption because of supposedly good order prospects for suede leather. This was combined with the expectation of further growth in the protein sector and the assumption that a generally lower output from the tanneries would automatically result in tight supply.

Each of these arguments is understandable when looked at individually. What was probably overlooked, however, is that price remains a decisive regulator even in a fundamentally healthy market environment. In the meantime, split prices per square-foot were no longer far away from the prices for the complete unsplit hide and in individual cases were even above them. Such a development can work for a certain period if demand is very strong and all parties are achieving sufficient margins. It should not, however, be regarded as a permanent price structure which can remain disconnected from the conditions in the rest of the market. Growth in the protein market is also undoubtedly present, but the effects of purchasing prices, transportation costs, processing capacities, qualities and sales opportunities are imprtant too. The fact that demand for protein products is generally increasing does not automatically mean that every available quantity of cattle split can be economically processed at every price.

Raw material, logistics, technology, capacity and selling price have to be properly synchronised. As soon as only one of these factors no longer fits, the calculation changes very quickly. This market is not a one-way street either. The summer period which is now beginning is traditionally a difficult time for a quick reassessment because numerous consumers, traders and processors reduce or completely stop their activities. At the same time, however, this period gives the parties involved an opportunity to bring inventories, prices and actual requirements back into a more realistic relationship. It will therefore probably be necessary to wait until well into the final quarter before we know what can really be expected for the split market after considering all influencing factors.

Demand for different proteins generally remains positive, but a one-dimensional view concentrating exclusively on proteins obtained from cattle does not lead to reliable conclusions. These products compete both with each other and with proteins from other animal and partly plant-based sources. Purity, function, availability, approval, origin, price and the existing processing capacities are decisive. In the split leather market, we have considered a reassessment overdue for quite some time. Suede leather can undoubtedly offer interesting opportunities, but here as well it is ultimately the sale of the finished shoe, bag or garment that decides and not the expectations at an earlier stage of production. We will see whether the current development now results in prices and risks being assessed more realistically for the coming season.

This part of the raw material market continues to be influenced by special developments which could in fact serve as a good example for the complete leather market. For sheepskins it remains the case that they are either required for high-quality niches in luxury goods, clothing and interior applications or that the value of the wool is the decisive factor influencing demand and prices.

The development of wool is particularly remarkable in this respect. A few years ago, there was hardly any demand left for large parts of this market. Prices were so low that wool or complete skins were sometimes regarded more as a cost factor than as a valuable raw material. The arguments at that time were very similar to the current discussions about leather: complicated technical processing, higher costs, lower productivity compared with standardised synthetic fibres and the general trend against animal-based raw materials. Many manufacturers therefore decided not to face the confrontation with the supposed mainstream any longer and replaced wool with synthetic materials. Starting particularly from China again, however, the market began to remember the value and the special characteristics of wool.

The low prices were undoubtedly helpful, but they were not sufficient on their own. The decisive point was that wool was again used in contemporary products, positioned as a functional natural material and newly explained to consumers. Today, its temperature regulation, breathability, odour resistance, touch and possible applications in bedding, sportswear, outdoor clothing and leisurewear are again being recognised much more strongly. At the beginning of 2026, the wool industry reported firmer prices, tighter supply and broader demand. Chinese processors that previously concentrated on cotton or plastic are increasingly examining wool blends and younger consumer groups.

The sheepskin market has also recovered considerably within a short period. In Australia, prices increased as a result of tighter supply, higher Merino wool prices and stronger Chinese demand, in some cases reaching their highest levels for several years. Within a very short period, a market which had already largely been written off by many has therefore completely changed.

One can only repeat again and again that this should basically also be the way forward for leather. The starting position and many of the arguments are comparable. Leather is also a natural material with characteristics that cannot be completely reduced to a technical data sheet or a price per square-metre. The difference is that the wool industry has worked specifically over many years to develop new applications, involve designers and brands, communicate functional properties and create consumer demand. Wool industry organisations now concentrate explicitly on consumer insights, product innovation, young designers, performance clothing and digital sales channels.

Comparable arguments are neither used in a sufficiently coordinated way by the leather industry nor taken up by mass manufacturers of consumer goods. They are also unlikely to do so on their own initiative as long as alternative materials are cheaper, easier to process and sufficient for selling their products. The laws of the market also regulate this area. The decisive question for the industry is therefore not whether leather is theoretically a good, durable and high-quality material. Within the industry, this is undisputed. The real question is about what we have to do for consumers to recognise, appreciate and demand these characteristics again when making their purchasing decisions.

This task cannot begin and end with slaughterhouses or raw material traders. Tanneries cannot solve it alone because they very rarely have direct access to the final consumer. Demand has to be built together with designers, brands, product manufacturers and retailers. The leather industry has to provide the technical and factual arguments, brands have to develop desirable products from them, and retailers have to be willing to show the consumer the difference and be capable of explaining it, unless new business-to-consumer brands simply choose the direct route. The example from China mentioned before fits exactly into this discussion. It does not provide any guarantee that the products shown on a runway will finally become commercially successful, but it demonstrates that an upstream material producer can do more than wait for an order and then deliver an article from an existing collection. By becoming involved in design direction, material selection, sampling, finishing, commercial feasibility and international supply at an early stage, the supplier helps to reduce the gap between creative ideas and products that can be manufactured and sold.

Again, it is remarkable that this kind of thinking is coming from China, a country that was for a long time mainly regarded as a low-cost production base. It increasingly seems that parts of the Chinese industry are trying to combine manufacturing competence with design, product development and access to the consumer market, while many European companies are still discussing how to defend existing structures. It would also be wrong to rely exclusively on the luxury segment. Functional niches, high-quality work and outdoor footwear, motorcycle clothing, equestrian products, durable bags, repairable products, interior applications and the growing second-hand market also offer opportunities to make the special characteristics of the material visible.

For the markets, the summer initially means general quietness. Customers will purchase only their immediate requirements, producers will reduce their capacities, inventories will be kept as low as possible and decisions that do not have to be taken immediately will be postponed. Only extraordinary events could cause a surprising change or turnaround in the market situation during this period.

Geopolitical developments, energy prices, trade measures or unexpected production interruptions could create short-term movement, but they would not necessarily result in a healthy and sustainable improvement. For the leather supply chain, we maintain our view that a real recovery can only be created through a stronger use of leather as a material. A general improvement in consumer sentiment would undoubtedly be helpful and probably even necessary. On its own, however, it will hardly be sufficient to create a quick and fundamental change. If additional consumer spending mainly goes into travel, services, electronics, vehicles without leather, sports shoes made from textiles or low-priced furniture made from other materials, the leather supply chain will not benefit.

In addition to the purely cyclical developments, the question of the necessary structural changes remains. How much capacity is still required at each production stage? Which work can be carried out economically under European cost conditions? Which production stages will move further towards the raw material, lower-cost regions or the sales markets? Which companies will have to merge, specialise or withdraw completely from certain segments? And how can the revenues from hides, splits, fats, proteins and other by-products be combined in such a way that the complete processing operation becomes economically viable again? Another question must be added: which companies are prepared to become active participants in product development instead of remaining only suppliers waiting for orders?

The Chinese example described above does not guarantee success and should not be treated as a ready-made solution for the complete industry. Nevertheless, it points in the correct direction. It connects the knowledge of the material with design, sampling, industrial production, compliance and commercial distribution. These structural questions will probably not be answered comprehensively during the summer. They will not, however, simply disappear. In our opinion, the polarisation of the market will continue to increase, with large, low-cost and highly integrated producers capable of supplying standardised volumes for industrial demand on one side and specialised manufacturers with direct access to high-value niches on the other.

The greatest pressure remains on the companies in between, whose costs are too high for the mass market while their products are not special enough for a premium position. Until the end of the holiday period, we therefore do not expect any fundamental change. Business will remain quiet, selective and strongly related to immediate requirements. Prices may move for individual articles, particularly if short-term inventory or liquidity pressure develops. A general change in trend, however, would be a major surprise. During the final quarter, it will then become clear whether the cautious market participants were right with their defensive position or whether those who are already expecting stronger demand and correspondingly higher prices will be rewarded.