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Leatherbiz Market Intelligence executive summary: • • • • • • • •
Great uncertainty remains in the tariff situation The distortions are so extensive that no one can really escape unaffected Another topic that is keeping everyone busy is the European Union Deforestation Regulation (EUDR) There are threats that third countries will raise a case at the World Trade Organisation against the European Union over EUDR This threat is serious and perhaps ought to lead to EUDR, once again, being postponed or even cancelled There are two reasons why postponement and cancellation are unlikely to happen The European Commission has already lost face over EUDR and will not want to lose face again Secondly, there are large corporations that will be able to comply with EUDR and see this as a competitive advantage (because many others will not be able to comply) and have every interest in capitalising on it.
MARKET INTELLIGENCE
T
he holiday season in Europe has reached its peak. This means that hardly any leather-related factories will be open for the next two weeks. There is no such thing as a traditional summer holiday in Asia, which is why almost all eyes are on possible activity there. However, there is also relatively little to report from there, and really only that people are racking their brains as to how best to react to US tariff policy. If you look at the movement on the raw materials markets, Vietnam remains one of the main centres for leather and shoe production, alongside China. Even if the tariffs place a burden on imports from Vietnam to the US, hides exported from the US to Vietnam are cheap. This means that part of the tariffs that are then levied on shoes and other finished products are ‘paid’ by US livestock farmers, who are currently receiving less for their animals than they hoped owing to lower returns from slaughterhouses for hides. In the overall calculation for the cattle, this is not of decisive importance, but the fact remains. As already discussed in our last issue, China is focusing much more on the importance of the domestic market, because this is where one can see greater leverage for the leather industry at the moment. Of course, this does not mean that exports are not important and, for many products, the capacities from China cannot simply and immediately be replaced elsewhere. Nevertheless, the shifts to the Indian subcontinent and even Turkey cannot
be ignored; everything can still be turned upside down by the tariff disruption. The latest tariff announcements for Brazil also sent shockwaves through the leather supply chain. A tariff of 50% on goods from Brazil will close many doors for Brazilian products in the US market and put an end to the idea that Brazil could be a substitute supplier and production country to replace China. A 25% tariff announced for goods from India could also have a significant impact on leather products. The last word has not yet been spoken on this matter; the tariffs in this case (as in others) have a political rather than an economic background. For its part, the EU has concluded a tariff agreement with the US and opinions differ widely as to its impact and quality. At first glance, the 15% seems a rather low rate compared to others, but here too, products that use leather could also be hit hard. The agreements have not yet been signed and who can say at the present time whether what is being celebrated in the media as a major event will actually be finalised. It is therefore relatively easy to summarise that, with regard to the problem of tariffs for the US market, all we know at the moment is that in reality we know nothing. Such a situation is not very helpful at a time when the demand for leather products and the use of leather is under severe pressure anyway. This is still a very cautious formulation of the situation. In addition to the direct influences on and for exports of leather products from
many countries around the world to the US, the planning uncertainty is also an extremely large burden for all those involved. Only those who either source few or no raw materials from the US or export few or no finished products to that market can take a more relaxed view of the general chaos. However, the distortions are so extensive, even in indirect form, that no one can really escape completely unaffected. In recent weeks, many publicly listed companies have published their results for the second quarter and for the first half of 2025. The results were not particularly positive for the leather industry. European car manufacturers reported massive declines in turnover and profits and, as we all know, the use of leather has not been spared. The order situation at leather factories has been unsatisfactory for many months and this has now been confirmed once again by the figures. Publications and forecasts in such times of crisis must always be viewed with particular caution. Management boards are forced to strike a very fine balance between reality and optimism. One thing was clear from the announcements: a rapid improvement in the situation and thus also an increase in sales and production of vehicles that are (still) equipped with leather is hardly to be expected. This means that the European automotive leather industry is unlikely to see a rapid, noticeable recovery in demand. At this point, however, we should briefly mention that we have received somewhat better news from China and that many of the major manufacturers are still using leather in their interiors. We would also like to refer back to our last issue, in which we were able to report that, when in doubt and with a reasonable price difference, Chinese customers still prefer leather to plastic. The situation was not much better for luxury goods manufacturers. There were rays of hope, or at least one, with Hermès. But even there, there is talk of a deteriorating environment, if you read the statements correctly and know that material planning for the last quarter is being handled much more cautiously. By contrast, things looked bad for the other major groups. Declining sales and earnings, and as there is nothing more poisonous for exclusivity and luxury than failure, everything possible is being done to put the situation in perspective. A difficult task. Plans have been made, sales are not keeping pace with production, price increases have not been able to compensate, ‘noiseless’ solutions have to be found for unsold stocks of finished products and, in view of the